The current spot exchange rate is $1.55/€ and the three-month forward rate is $1.50/€. You enter into a short position on €1,000. At maturity, the spot exchange rate is $1.60/€. How much have you made or lost? A. Lost $100 B. Made €100 C. Made $150 D. Lost $50

Answer is A. Lost $100.

Refer below for the explanation.

Explanation:

Short position includes selling the money.

You will get (1.5 * 1,000) = $1,500.

In any case, you could get (1.6 * 1,000) = $1,600

In the event that you didn't have the forward agreement.

So you lost $1,600 - $1,500 = $100.

A. Lost $100

Explanation:

Short position refers to a trading technique which involves selling the currency for it to buy later and make a profit.

To calculate the loss if you don't have a forward contract:

Your loss will be

= €1,000 x ($1.50/€ - $1.60/€)

= $100