Andrea Cujoli is a currency speculator who enjoys "betting" on changes in the foreign currency exchange market. Currently the spot price for the Japanese yen is ¥129.87/$ and the 6-month forward rate is ¥128.53/$. Andrea thinks the yen will move to ¥128.00/$ in the next six months. Andrea should ________ at ________ to profit from changing currency values.

Question

Quizplus · Accepted Answer

Andrea should buy yen at the forward rate because she expects the yen to appreciate to ¥128.00/$, which is stronger than the forward rate of ¥128.53/$. By buying yen at the forward rate, she can profit if the yen appreciates as she anticipates.

Andrea Cujoli Is a Currency Speculator Who Enjoys "Betting" on Changes