Mr. X, an active stock market investor decides to invest
(Buy) USD 250000 for a period of 6 month in S&P 500. The spot USD/INR rate
at that time was 48.25 and currency futures rate was 48.65. After 6 months, the market
moves as per his expectation and his investment goes up by 15 %. If spot
USD/INR exchange rate moves to 45.46 and currency futures rate moves to 45.95,
what position he has to take in futures contracts and how much profit/loss he
makes.
A.
Long, Profit Rs. 1785300
B.
Long, Loss Rs. 1753800
C.
Short, Profit Rs. 1783500
D.
Short, Loss Rs. 1753800
Ans: (C)
Explanation:
Mr. X investment USD 250000, return @
15%, 250000*15/100 = 37500; 250000+37500 = 287500
Spot rate at the time of investment is
48.25; 250000*48.25= 12062500
Spot rate after 6 month is 45.46;
2875500*45.46 = 13069750
Profit in spot: 13069750 - 12062500 =
1007250
Sell position in Future at 48.65:
287500*48.65 = 13986875
Squared off at 45.95: 287500*45.95 =
13210625
Profit in future: 13986875-13210625 =
776250
Total
profit: 1007250 + 776250 = Rs 1783500
