1. Helen Luong, a currency trader for Pegasus Partners, uses the following futures quotes on the British pound (£) to speculate on the value of the pound. British Pound Futures, US$/pound (CME) Contract = 62,500 pounds 1 contract is £62,500 Open Maturity Open High Low Settle Change Interest March 1.4432 1.4471 1.4422 1.4468 0.0036 25,605 June 1.4275 1.4296 1.4267 1.4280 0.0005 809 a. If Helen buys 5 June pound futures, and the spot rate at maturity is $1.4042/£, what is the value of her position

Answer: (a) $7,437.5(b) $12,300.0(c) $3,075.0Explanation:(a) June settle price from the table = 1.4280 Spot price at the contract expiration = 1.4042 So, the difference in $ for each contract = 1.4280 - 1.4042                                                                = 0.0238 Helen has to buy for more than the spot price, so she is in loss Helen is in loss of 0.0238 per contract Total loss = 5 × 62500 × 0.0238                 = $7,437.5(b) March settle price from the table = 1.4468 Spot price at the contract expiration = 1.4632 So, the difference in $ for each contract = 1.4632 - 1.4468                                                             = 0.0164 Helen has to sell for less than the spot price, so she is in loss. Helen is in loss of 0.0164 per contract .Therefore,Total loss = 12 × 62500 × 0.0164                 = $12,300.0(c) March settle price from the table = 1.4468 Spot price at the contract expiration = 1.4632 So, the difference in $ for each contract = 1.4632 - 1.4468                                                                    = 0.0164 Helen has to buy for less than the spot price, so she is in gain .Helen is in gain of 0.0238 per contract .Total loss = 3 × 62500 × 0.0164                 = $3,075.0