Suppose that XYZ International Company has purchased a Swiss francs futures contract (contact size is SFr 125,000) at a price of $0.8250 at $0.83
If the spot rate for the Swiss franc at the date of settlement is SFr = $0.8250, what is the Company's gain or loss on the contract?
What will be an ideal response?
Answer: XYZ has bought Swiss francs worth $0.825 at a price of $0.83. Thus, it has lost $0.005 per franc for a total loss of 125,000 x .005 = $625.
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