The Hamburger Standard and Futures

The Hamburger Standard and Futures - the following...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
3/25/10 The Hamburger Standard Country In local currency In US dollars Implied PPP of the dollar Actual dollar exchange rate Under (-) / Over (+) valuation against $, % United States $2.71 2.71 Australia A$3.00 1.86 1.11 1.61 -31 Britain £1.99 3.14 1.36 1.58 +16 Canada C$3.20 2.21 1.18 1.45 -18 Euro Area €2.71 2.97 1.00 1.10 +10 New Zealand NZ$3.95 2.21 1.46 1.78 -18
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
3/25/10 Big Mac Calculations Australian buyer paid out in US Dollars o Australian Price in Australian Dollars/ Actual Exchange Rate 3.00A$/1.61AER= 1.86US$
Background image of page 2
3/25/10 Futures—Calculations (An Example) Suppose A buys 20 contracts for December 16 on December 11. The December 16 Sterling contract is traded at $1.58. Each contract includes 62,500 units of Sterling Pound. Suppose the market has
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 4
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: the following settlement prices each day, from initiation to maturity. Settlement Prices December 12 $1.60 December 13 $1.62 December 14 $1.53 December 15 $1.55 December 16 $1.56 3/25/10 Futures Example Now let us see how the accounts of A (the buyer) and B (the seller) are affected: Value of Futures Contract on Dec. 11th: 20 X 1.58 X 62,500= $1,975,000 Value of Futures Contract on Dec. 12th: 20 X 1.60 X 62,500= $2,000,000 Difference: $2,000,000 - $1,975,000= $25,000 Date Account A Account B December 12 +25,000-25,000 December 13 +25,000-25,000 December 14-112,500 +112,500 December 15 +25,000-25,000 December 16 +12,500-12,500...
View Full Document

This note was uploaded on 03/24/2010 for the course MBA 720 taught by Professor Ajami during the Summer '09 term at Wright State.

Page1 / 4

The Hamburger Standard and Futures - the following...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online