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Question 138.1: An investor enters into a short forward contract to sell 100,000 Euros for US dollars at an exchange rate of $1.40 US dollars per Euro. How much does the investor gain or lose if the exchange rate at the end of the contract is $1.20? | Financial Risk Manager Part 1 Quiz - LeetQuiz

Explanation:

For a short forward on euros, the investor agrees to sell euros at $1.40 per euro.

At expiry, the market exchange rate is $1.20 per euro, so the investor benefits because the euros can effectively be sold above market.

\text{Gain per euro} = 1.40 - 1.20 = 0.20\ \text{USD}

\text{Total gain} = 0.20 \times 100{,}000 = 20{,}000\ \text{USD}

Correct answer: C. Gain of USD $20,000

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Question 138.1: An investor enters into a short forward contract to sell 100,000 Euros for US dollars at an exchange rate of `$1.40` US dollars per Euro. How much does the investor gain or lose if the exchange rate at the end of the contract is `$1.20`?

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