Homework Answers
a. £9229.96
b. £13419.22
c. £1032.35
d. £6924.27
e. £1513.15
f. £1960.78
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ILLUSTRATIVE QUESTIONS - MANAGING EXPOSURE QUESTION ONE You are given the following information for the £...
STQ4: [Foreign Exchange Trading You are given the following information about currency rates for pound sterling...
STQ4: [Foreign Exchange Trading You are given the following information about currency rates for pound sterling spot and forward. Currency Spot 1 Month Forward 3 month Forward US (Dollar) 1.5200 - 1.5210 0.32 -0.27c pm 0.89-0.84 c pm Canada (Dollar) 1.8630 - 1.8640 0.30-0.20c pm 0.90 -0.80 c pm Kenya (KES) 24.05'4- 28.0644 2% - 17 pm 6%4-6/4 c pm Tanzania (TZS) 2072.20 - 2079.30 10-20c dis 45 - 55c dis (a) Required: Calculate the cost or value in pounds...
The original question and answers are shown below, but my question is how do we get...
The original question and answers are shown below, but my question is how do we get the value:Pound0.98 when answering the part B question? Assume a forward contract on pound sterling. Suppose the spot exchange rate is $1.60/pound. Suppose the three month interest rate on dollar is 6% while the three month interest rate on pound is 8%, both continuous compounding terms. What is the arbitrage free three month forward rate? (a) What is the arbitrage free forward price? (b)...
You are running the FX trading desk at a large, high-grade investment bank. You have the...
You are running the FX trading desk at a large, high-grade
investment bank. You have the following rates available to you:
Assume that there are no transaction costs, and that you can
either buy or sell at these exchange rates. Also, the interest
rates above are quoted in annualized, continuously-compounded form,
and are the same for borrowing or lending
(a) What must the 3-month Japanese interest rate be, if there is
no arbitrage?
(b) Suppose that the annualized, continuously compounded...
Answer questions 1 through 10 based on the following data: . 3-month ÚS (domestic) interest rate ...
Answer questions 1 through 10 based on the following data: . 3-month ÚS (domestic) interest rate 1.50% . 3-month Japanese interest rate 1.00% . Current spot exchange rate - $0.090 per yen . Current forward exchange rate - $0.095 per yen 4. On a covered basis, the 3-month dollar-denominated rate of return on Japanese yen deposits is or so based on the exact formula. A) -4.32% B)-1.00% C) 6.61% D) 8.52% 5. On a covered basis, the 3-month dollar-denominated rate...
FOREIGN EXCHANGE
QUESTION ONEThe Dutch manufacturer Cloghopper has the following JPY commitments: i. A/R of JPY 1,000,000 for thirty days. ii. A/R of JPY 500,000 for ninety days. iii. Sales contract (twelve months) of JPY 30,000,000. iv. A forward sales contract of JPY 500,000 for ninety days. v. A deposit that at maturity, in three months, pays JPY 500,000. vi. A loan for which Cloghopper will owe JPY 8,000,000 in six months. vii. A/P of...
Question 3 Part A Malfoy plc is a UK company that expects to receive $3,600,000 from...
Question 3 Part A Malfoy plc is a UK company that expects to receive $3,600,000 from a US customer in three months' time. Due to the size of the receipt, the company plans to minimise the risk of an adverse exchange rate movement through the use of a money market hede The following data regarding annual interest rates and the current spot rate is available US dollar (USD) British pound (GBP) 12 Month Borrowing 2.750 3.755 12 Month Lending 2.625...
9. Using the following data given in the Table below, answer these questions: Type US Treasury...
9. Using the following data given in the Table below, answer these questions: Type US Treasury Note US Treasury Note US Treasury Note US Treasury Note US Treasury Bond US Treasury Bond Coupon 7.25% 10.75% 5.75% 5.00% 8.75% 6.13% Maturity 2 year 3 year 8 year 9 year 18 year 27 year Bid 110:00 123:12 112:00 106:24 143:26 114:11 Ask 110:01 123:13 112:01 106:25 143:27 114:12 Yield (Ask) 2.07% 2.55% 3.97% 4.09% 5.02% 5.13% US Treasury Strip US Treasury Strip...
BF2207 Question 2 Suppose that, six months ago, you sold a call option on 1,000,000 euros...
BF2207 Question 2 Suppose that, six months ago, you sold a call option on 1,000,000 euros (EUR) with an expiration date of six months and an exercise price of 1.1780 United States dollars (USD). You received a premium on the call option of 0.045 USD per unit. Assume the following: • Money market interest rates for EUR are constant through time and equal 5% for all maturities. • Money market interest rates for USD are constant through time and equal...
Use Figure 21.1 to answer the following questions: a. If you have $100, you can get...
Use Figure 21.1 to answer the following questions: a. If you have $100, you can get euros. (Do not include the euro sign, €. Round your answer to 2 decimal places, e.g., 32.16.) b. One euro is worth (Round your answer to 4 decimal places, e.g., 32.1616.) c. If you have 5 million euros, you have (Enter your answer in dollars, not millions of dollars, rounded to the nearest whole dollar amount, e.g., 1,234,567.) d. The Singapore dollar is worth...
PLEASE PUT SOLUTION IN THE SAME FORMAT AS THE IMAGE. THANK YOU! Exercise A-8 (Algo) Derivatives;...
PLEASE PUT SOLUTION IN THE SAME FORMAT AS THE IMAGE.
THANK YOU!
Exercise A-8 (Algo) Derivatives; foreign currency; cash flow hedge [LOA-4] Cleveland Company is a U.S. firm with a U.S. dollar functional currency that manufactures copper-related products. It forecasts that it will sell 4,000 feet of copper tubing to one of its largest customers at a price of 48,000,000. Although this sale has not been firmly committed, Cleveland expects that the sale will occur in six months on June...
STQ4: [Foreign Exchange Trading You are given the following information about currency rates for pound sterling spot and forward. Currency Spot 1 Month Forward 3 month Forward US (Dollar) 1.5200 - 1.5210 0.32 -0.27c pm 0.89-0.84 c pm Canada (Dollar) 1.8630 - 1.8640 0.30-0.20c pm 0.90 -0.80 c pm Kenya (KES) 24.05'4- 28.0644 2% - 17 pm 6%4-6/4 c pm Tanzania (TZS) 2072.20 - 2079.30 10-20c dis 45 - 55c dis (a) Required: Calculate the cost or value in pounds...
You are running the FX trading desk at a large, high-grade
investment bank. You have the following rates available to you:
Assume that there are no transaction costs, and that you can
either buy or sell at these exchange rates. Also, the interest
rates above are quoted in annualized, continuously-compounded form,
and are the same for borrowing or lending
(a) What must the 3-month Japanese interest rate be, if there is
no arbitrage?
(b) Suppose that the annualized, continuously compounded...
Answer questions 1 through 10 based on the following data: . 3-month ÚS (domestic) interest rate 1.50% . 3-month Japanese interest rate 1.00% . Current spot exchange rate - $0.090 per yen . Current forward exchange rate - $0.095 per yen 4. On a covered basis, the 3-month dollar-denominated rate of return on Japanese yen deposits is or so based on the exact formula. A) -4.32% B)-1.00% C) 6.61% D) 8.52% 5. On a covered basis, the 3-month dollar-denominated rate...
Question 3 Part A Malfoy plc is a UK company that expects to receive $3,600,000 from a US customer in three months' time. Due to the size of the receipt, the company plans to minimise the risk of an adverse exchange rate movement through the use of a money market hede The following data regarding annual interest rates and the current spot rate is available US dollar (USD) British pound (GBP) 12 Month Borrowing 2.750 3.755 12 Month Lending 2.625...
9. Using the following data given in the Table below, answer these questions: Type US Treasury Note US Treasury Note US Treasury Note US Treasury Note US Treasury Bond US Treasury Bond Coupon 7.25% 10.75% 5.75% 5.00% 8.75% 6.13% Maturity 2 year 3 year 8 year 9 year 18 year 27 year Bid 110:00 123:12 112:00 106:24 143:26 114:11 Ask 110:01 123:13 112:01 106:25 143:27 114:12 Yield (Ask) 2.07% 2.55% 3.97% 4.09% 5.02% 5.13% US Treasury Strip US Treasury Strip...
BF2207 Question 2 Suppose that, six months ago, you sold a call option on 1,000,000 euros (EUR) with an expiration date of six months and an exercise price of 1.1780 United States dollars (USD). You received a premium on the call option of 0.045 USD per unit. Assume the following: • Money market interest rates for EUR are constant through time and equal 5% for all maturities. • Money market interest rates for USD are constant through time and equal...
Use Figure 21.1 to answer the following questions: a. If you have $100, you can get euros. (Do not include the euro sign, €. Round your answer to 2 decimal places, e.g., 32.16.) b. One euro is worth (Round your answer to 4 decimal places, e.g., 32.1616.) c. If you have 5 million euros, you have (Enter your answer in dollars, not millions of dollars, rounded to the nearest whole dollar amount, e.g., 1,234,567.) d. The Singapore dollar is worth...
PLEASE PUT SOLUTION IN THE SAME FORMAT AS THE IMAGE.
THANK YOU!
Exercise A-8 (Algo) Derivatives; foreign currency; cash flow hedge [LOA-4] Cleveland Company is a U.S. firm with a U.S. dollar functional currency that manufactures copper-related products. It forecasts that it will sell 4,000 feet of copper tubing to one of its largest customers at a price of 48,000,000. Although this sale has not been firmly committed, Cleveland expects that the sale will occur in six months on June...
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