Peter Simpson thinks that the U.K. pound will cost $1.43/£ in six months. A 6-month currency futures contract is available today at a rate of $1.44/£. If Peter was to speculate in the currency futures market, and his expectations are correct, which of the following strategies would earn him a profit?
A) Sell a pound currency futures contract.
B) Buy a pound currency futures contract.
C) Sell pounds today.
D) Sell pounds in six months.

Question

Quizplus · Accepted Answer

If Peter expects the pound to decrease in value to $1.43/£, selling a futures contract at $1.44/£ would allow him to profit from the decline in the pound's value.

Peter Simpson Thinks That the U