IRP and Speculation in Currency Futures Assume that interest rate parity exists. The spot rate of the Argentine peso is $.40.
The 1-year interest rate in the United States is 7 percent versus 12 percent in Argentina.
Assume the futures price is equal to the forward rate. An investor purchased futures contracts on Argentine pesos, representing a total of 1,000,000 pesos.
Determine the total dollar amount of profit or loss from this futures contract based on the expectation that the Argentine peso will be worth $.42 in 1 year.