Assume That the Spot Price for Converting Pounds into Dollars

question 59

Multiple Choice

Assume that the spot price for converting pounds into dollars is £1 = $1. A speculator converts £1 million into dollars today and enters into a forward contract to convert the dollars back into pounds after six months. If the spot rate after six months is £1 = $1.25, which of the following statements will be true?

• A) The speculator will make a profit of $0.25 million.
• B) The speculator will make a loss of £0.2 million.
• C) The speculator will make a loss of $0.8 million.
• D) The speculator will make a profit of £0.2 million.

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Definitions:

Auscultatory Site

A specific area on the body where internal sounds, such as heart or lung sounds, are best heard with a stethoscope.

Side-to-Side Comparison

A diagnostic approach where the function or structure of one side of the body is compared to the other to identify abnormalities.

Thorax

The part of the body between the neck and the abdomen, encased by the rib cage, and containing the heart and lungs.

Tactile Fremitus

The palpable vibration transmitted through the chest wall when a person speaks, used to assess the presence of lung and respiratory diseases.