Assume the current market futures price is 1.66 A$/$. You borrow 167,000 A$, convert the proceeds to U.S. dollars, and invest them in the U.S. at the risk-free rate. You simultaneously enter a contract to purchase 170,340 A$ at the current futures price (maturity of 1 year). What would be your profit (loss)?
Consider the following:
A. Profit of 630 A$
B. Loss of 2300 A$
C. Profit of 2300 A$
D. Loss of 630 A$
A. Profit of 630 A$
[A$167,000/1.67 × 1.04 × 1.66] ? (A$167,000 × 1.03) = A$630.
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