Assigment 4

Chapter 5. (2, 4,5,12,13)

2. Using Exhibit 5.4, calculate the one-, three-, and six-month prior crossexchange rates surrounded by the Canadian dollar and the Swiss franc using the most up-to-the-minute quotations. State the preceding cross-rates in Canadian terms.

Formula: Fn(CD/SF)= Fn($/SF)/Fn($/CD)

F1 (CD/SF) = .8485/.8037=1.0557
F2 (CD/SF) = .8517/.8043 = 1.0589
F3 (CD/SF) = .8573/.8057 = 1.0640

4. fictionalize the following one-, three-, and six-month outright forward European term bid-ask quotes in forward points.

know 1.34311.3436
One-Month 1.34321.3442
Three-Month 1.34481.3463
six-Month 1.34881.3508

One-Month 01-06
Three-Month 17-27
Six-Month 57-72

5. Using the spot and outright forward quotes in problem 3, determine the corresponding bid-ask spreads in points.

Spot 5
One/Month 10
Three Month 15
Six/Month 20

12. The current spot exchange rate is $1.95/£ and the three-month forward rate is 1.90/£. On the basis of your analysis of the exchange rate, you are pretty confident that the spot exchange rate lead be $1.92/£ in three months. Assume that you would like to secure or sell £1,000,000.

a.What actions do you need to take to forge in the forward market?



What is the expected dollar pull ahead from speculation?

$ 20,000.00 = £1,000,000.00 x ($1.92 - $1.90)

b.What would be your speculative profit in dollar terms if the spot exchange rate in reality turns out to be $1.86/£.

-$40,000 = £ 1,000,000.00 x ($1.86 1.90)

13. Omni Advisors, an international pension storehouse manager, plans to sell equities denominated in Swiss francs (CHF) and purchase an equivalent get along of equities denominated in South African rands (ZAR).
Omni will realize crystallise proceeds of 3 million CHF at the end of 30 days and wants to eliminate the risk that the ZAR will appreciate coitus to the CHF during this 30-day period. The following exhibit shows current exchange rates amid the ZAR, CHF, and the U.S. dollar...If you want to get a full essay, order it on our website: Ordercustompaper.com



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