Jacob Singleton trades currency for Karma Capital of Geneva. Jacob has $10 million to begin with, and he must state all profits at the end of any speculation in U.S. dollars. The spot rate on the euro is $1.3358/€, while the 30-day forward rate is $1.3349/€.
(1) If Jacob believes the euro will continue to rise in value against the US dollar, so that he expects the spot rate to be $1.3600/€ at the end of 30 days, what should he do?
(2) If Jacob believes the euro will depreciate in value against the US dollar, so that he expects the spot rate to be $1.2800/€ at the end of 30 days, what should he do?