Jack Hemmings Bought a 3-Month British Pound Futures Contract for $1.4400/£

question 34

Multiple Choice

Jack Hemmings bought a 3-month British pound futures contract for $1.4400/£ only to see the dollar appreciate to a value of $1.4250 at which time he sold the pound futures. If each pound futures contract is for an amount of £62,500, how much money did Jack gain or lose from his speculation with pound futures?

• A) $937.50 loss
• B) $937.50 gain
• C) £937.50 loss
• D) £937.50 gain

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Definitions:

Income Effect

The change in an individual's or economy's income and how that change affects the quantity demanded of a good or service.

Real Income

Income of individuals or nations after adjusting for inflation, representing the actual buying power of the income.

Money Income

Income measured in terms of money received from employment, investments, or other sources, rather than in terms of goods or services.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price level, at a specific time.