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an investor enters into a long forward contract to sell 100,000 euros for u.s. dollars at an exchange rate of 1.2000 u.s. dollars per euro. how much does the investor gain or lose if the exchange rate at the end of the contract is (a) 1.2900 and (b) 1.2200? a. the investor experiences a gain of $5,500 b. the investor experiences a gain of $9,000 and a gain of $2,000 respectively c. the investor experiences a gain of $9,000 and a loss of $2,000 respectively d. the investor does not experience neither a gain nor a loss

Sagot :

(a) The investor is obligated to sell pounds for 1.4000 when they are worth 1.3900. The gain is (1.4000-1.3900) ×100,000 = $1,000.  

(b) The investor is obligated to sell pounds for 1.4000 when they are worth 1.4200. The loss is (1.4200-1.4000)×100,000 = $2,000

What is gain and loss?

In plain English, a gain is an increase in an asset's worth whereas a loss is a decrease in that asset's value. Realized and unrealized gains and losses can both be separated. Unless the realised price exactly matches what was paid, investors realise a gain or a loss when they sell an item.

Add the initial purchase price to the selling price and then deduct it. Gain or loss is the end consequence. Divide the investment's gain or loss by the investment's initial cost to determine the result. The next step is to multiply the figure by 100 to determine the investment's percentage change.

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