foreign exchange advisory service

1 answer below » Suppose today’s rate is $0.62/Euro. The 6-month interest rates on dollars and Euro are 6% and 3%, respectively. The 6-month forward rate is $0.6185. A exchange has predicted that the Euro will appreciate to $0.64 within six months. a. How would you use forward contracts to profit in the above situation? b. How would you use money market instruments (borrowing and lending) to profit? c. Which alternatives (forward contracts or money market instruments) would you prefer? Why?

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