In International Monetary Market an international forward bid for December 15 on pound sterling is $ 1.2816 at the same time that the price of IMM…
CA Final · Advanced Financial Management · MTP · May 2026
In International Monetary Market an international forward bid for December 15 on pound sterling is $ 1.2816 at the same time that the price of IMM sterling future for delivery on December 15 is $ 1.2806. The contract size of pound sterling is £ 62,500. Suggest how could the dealer use arbitrage in profit from this situation and how much profit is earned?
Suggested Answer and Working Notes:
Buy £ 62500 × 1.2806 = $ 80,037.50 Sell £ 62500 × 1.2816 = $ 80,100.00 Profit = $ 62.50
Topics: Foreign Exchange Exposure and Risk Management
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