Question 4:

Suppose that the spot price of the Swiss franc in terms of the Australian dollar is 0.72 dollars. The 90-day forward price is A$ 0.81. A currency trader who is willing to ignore risk considerations and thinks the Swiss franc will be worth 0.90 Australian dollars in 90 days should

1. sell francs forward in return for Australian dollars.

2. sell Australian dollars forward in return for francs.

3. buy Swiss francs forward in return for the Australian dollars.

4. do either 2 or 3.

Choose the correct option.