An investor has entered into a 90-day forward contract to purchase 2 million GBP at an all-in rate of USD 1.4612. In 30 days, the following quotes were available:
USD/GBP
spot rate
1.4522−24
30-day forward rate
1.4618−21
60-day forward rate
1.4621−25
90-day forward rate
1.4632−36
Interest rate information:
Interest rates
When contract was initiated
Currently (t=30)
USD
GBP
USD
GBP
30-day
0.20%
0.32%
0.20%
0.32%
60-day
0.21%
0.32%
0.21%
0.32%
90-day
0.21%
0.33%
0.21%
0.33%
The mark-to-market value of the forward contract is closest to: A. USD 2599 B. USD 1999 C. USD 1800
To unwind the forward contract, the investor would enter into a 60-day forward contract to sell GBP. The relevant exchange rate is 1.4621. The value obtained will be in price currency (USD) and would be discounted at USD interest rate for 60 days (at t=30).
