A British Pound futures contract is for 62,500 pounds.The futures exchange rate today on the pound is $1.51 and will be $1.55 in 60 days.If you purchase the contract today to hedge a British pound liability due in 60 days,how much would you gain (lose)on the contract?

Question

Quizplus · Accepted Answer

The gain on the contract can be calculated by taking the difference between the future exchange rate and the current exchange rate, then multiplying by the contract size. The calculation is (1.55 - 1.51) * 62,500 = $2,500. This results in a gain of $2,500.

A British Pound Futures Contract Is for 62,500 Pounds