In October 2013, there is a consensus in the capital marke…
In October 2013, there is a consensus in the capital market that the annual inflation rate is likely to be 3.5% in US and -1.5% in China for the next two years. The spot exchange rate in October 2013 is CNY6.10/$. Based on this information, answer the following questions regarding your prediction on the foreign exchange rate. Using the exact version of parity relationships, the forward rate in October 2015 (two years from 2013) is CNY [l1] /$. (Please use indirect quote and leave 2 decimal points) (2 points)
Read DetailsIn October 2013, there is a consensus in the capital marke…
In October 2013, there is a consensus in the capital market that the annual inflation rate is likely to be 3.5% in US and -1.5% in China for the next two years. Based on this information, answer the following questions regarding your prediction on foreign exchange rate. Chinese Yuan will be selling at a forward [l1] (premium/discount). The size of the forward premium/discount is [l2] %. Use approximate version of parity relationships. (2 points)
Read DetailsSuppose you observe the following exchange rates: S($/£) = 1…
Suppose you observe the following exchange rates: S($/£) = 1.3. The one-year forward rate is F1($/£) = 1.32. The risk-free interest rate in the U.S. is 5% and in UK it is 2%. You can borrow either $1,300,000 or £1,000,000. Your total arbitrage profit will be $ [l1] (please leave whole dollars for your answer).
Read DetailsQuestions 33-36 are based on the following information: C…
Questions 33-36 are based on the following information: Country in U.S. $ Per U.S. $ Tuesday Monday Tuesday Monday Britain (Pound) £62,500 1.6000 1.6100 0.625 0.6211 1 Month Forward 1.6100 1.6300 0.6211 0.6173 3 Months Forward 1.6300 1.6600 0.6173 0.6024 6 Months Forward 1.6600 1.7200 0.6024 0.5814 12 Months Forward 1.7200 1.8000 0.5814 0.5556 Euro €62,500 1.2000 1.2000 0.833333 0.833333 1 Month Forward 1.2100 1.2100 0.82645 0.82645 3 Months Forward 1.2300 1.2300 0.813008 0.813008 6 Months Forward 1.2600 1.2600 0.793651 0.793651 12 Months Forward 1.2900 1.3200 0.775194 0.7575758 Using the table above, what is the spot cross-exchange rate between pounds and euro (using Tuesday quote)?
Read DetailsCountry in US$ Bid Ask Swiss Franc (CHF) 0.7648 0.7652…
Country in US$ Bid Ask Swiss Franc (CHF) 0.7648 0.7652 Euro (€) 1.4000 1.4200 What are the cross-exchange rates for Swiss Francs priced in euro (€/CHF)? Please leave 4 decimal points for your answer. Bid: € [l1] /CHF Ask: € [l2] /CHF
Read DetailsThe current spot exchange rate is $1.06/CAD, and the 3-month…
The current spot exchange rate is $1.06/CAD, and the 3-month forward rate is $1.20/ CAD. a) If you speculate that the future spot rate in 3 months will be $1.10/CAD. What kind of position (long/short) that you would like to enter in the forward market? Answer: You would like to enter a [l1] (long/short) position in the forward contract. b) What is your expected profit in USD? Suppose that you can buy or sell CAD 100,000. Answer: Your expected profit will be $ [l2] . c) At expiration, the spot price turns out to be $1.25/ CAD. Do you profit or do you lose at maturity date? What is the size of your profit/loss in USD? Answer: You [l3] (profit/lose). The size of your total profit/loss is $ [l4] . (please calculate your profit/loss in USD and use negative sign to indicate loss)
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