A Hong Kong based investment company requires USD 4 million in 40 days to close a deal in the US state of California. It approaches its FX dealer for a forward quote. Assume one year is 360 days. If the dealer quotes the spot rate as USD/HKD 7.7817 and the interest rate for HKD deposits is 2.5% and that for USD deposits is 3.85%: 1) What are the forward points? (Give answer in forward points to 2 decimal places, where 1 forward point = 0.0001) 2) How should the forward points be treated with respect to the spot rate? The forward points should be (No answer given) + the spot rate. 3) What is the forward quote the dealer would give the company? (Give answer to 4 decimal places) 4) To receive the USD 4 million in 40 days, how much HKD does the company need to pay its dealer? HKD millions (Give answer in HKD millions to 4 decimal places, e.g. HKD 1 million = 1.0000)
A Hong Kong based investment company requires USD 4 million in 40 days to close a deal in the US state of California. It approaches its FX dealer for a forward quote. Assume one year is 360 days. If the dealer quotes the spot rate as USD/HKD 7.7817 and the interest rate for HKD deposits is 2.5% and that for USD deposits is 3.85%: 1) What are the forward points? (Give answer in forward points to 2 decimal places, where 1 forward point = 0.0001) 2) How should the forward points be treated with respect to the spot rate? The forward points should be (No answer given) + the spot rate. 3) What is the forward quote the dealer would give the company? (Give answer to 4 decimal places) 4) To receive the USD 4 million in 40 days, how much HKD does the company need to pay its dealer? HKD millions (Give answer in HKD millions to 4 decimal places, e.g. HKD 1 million = 1.0000)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:A Hong Kong based investment company requires USD 4 million in 40 days to close a deal in the US state of California. It approaches its
FX dealer for a forward quote. Assume one year is 360 days. If the dealer quotes the spot rate as USD/HKD 7.7817 and the interest rate
for HKD deposits is 2.5% and that for USD deposits is 3.85%:
1) What are the forward points?
(Give answer in forward points to 2 decimal places, where 1 forward point = 0.0001)
2) How should the forward points be treated with respect to the spot rate?
The forward points should be
(No answer given) +
the spot rate.
3) What is the forward quote the dealer would give the company?
(Give answer to 4 decimal places)
4) To receive the USD 4 million in 40 days, how much HKD does the company need to pay its dealer?
HKD
millions (Give answer in HKD millions to 4 decimal places, e.g. HKD 1 million = 1.0000)
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