You Have One Short Position in Foreign Exchange Futures Contracts

question 9

Multiple Choice

You have one short position in foreign exchange futures contracts on £s.The contract size is £100,000.During the day the futures exchange rate (measured in $/£) increased by $0.01/£ while the spot exchange rate decreased by 0.01.As a result,you:

• A) have won $1,000.
• B) have lost $1,000.
• C) have neither won nor lost any money.
• D) are unable to answer based on the information provided.

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Definitions:

ROE

Return on Equity indicates a company's return from shareholder investments by showcasing the profit made from each dollar invested by shareholders.

Required Return

The minimum expected return an investor demands for holding a particularly risky investment, influenced by the risk-free rate and the risk premium.

Beta

An assessment of the unpredictability or inherent risk found in a security or portfolio when juxtaposed with the general market.

Risk-Free Rate

The theoretical rate of return of an investment with zero risk, serving as a benchmark for measuring the risk of other investments.