Contract Open High hilo Low Eurodollar (CME) -$1,000,000; pts of 100% 97.2400 97.2450 97.2225 Jan March June Dec Settle Chg 97.2275 -0.0125 97.2900 97.3000 97.2750 97.2950 97.2650 97.2900 97.2550 97.2800 97.2900 97.3200 97.2700 97.3050 Open interest 256,596 0.0050 1,463,124 0.0100 1,244,678 0.0100 1,719,535
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- Analyse the scenario below. In each case, explain your reasoning Suppose that the current EUR/GBP exchange rate is £0.92 per euro. The current2-year interest rates are: GBP 4%, EUR 5%. Suppose further that you can use a 2-year forward contract with a EUR/GBP rate of £0.91 per euro. Could this contractbe used for an arbitrage opportunity? If yes, provide an example. Calculatearbitrage profit and explain how this profit can be earnedSuppose there are no transaction costs. If the one year forward rate of the euro is an accurate estimate of the spot rate one year from now, then the actual cost of hedging payable will be: A. positive if the forward rate exhibits a premium, and negative if the forward rate exhibits a discount. B. positive. C. negative. D. zero.) In another case are these quotes: Spot rate €1.2562/£; 1 month forward €1.2662/£. Which of the two currencies is trading at forward premium?
- How is the cost of hedging payable will be if a 90-day forward rate of the euro completely estimate the spot rate in 90 days from now? A. Zero B. Lower C. Undetermined D. HigherWhich of the following statements is (are) TRUE? Select one or more alternatives: If the AUD trades at a forward premium relative to the NZD, we would expect the NZD risk-free rate to be higher than the AUD risk-free rate. If the 1-year AUD risk-free rate is higher than the 1-year NZD risk-free rate then the value of the NZD will rise relative to the AUD over the next year. Assuming it doesn't hedge, a New Zealand based company importing Australian products will suffer if the value of the AUD rises relative to the NZD. □ If covered interest rate parity holds, then uncovered interest rate parity must also hold.A6) Finance What is a forward exchange rate? When does deliv- ery occur on a 90-day forward contract?
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- ) In another case are these quotes: Spot rate €1.2562/£; 1 month forward €1.2662/£ Which of the two currencies is trading at forward discount? And whyRequired:a. Calculate the dollar proceeds from the FI’s loan portfolio at the end of the year, the return on the FI’s loan portfolio, and the net return for the FI if the pound spot foreign exchange rate falls to $1.20/£1 and the lira spot foreign exchange rate falls to $0.156/TL1 over the year.b. Calculate the dollar proceeds from the FI’s loan portfolio at the end of the year, the return on the FI’s loan portfolio, and the net return for the FI if the pound spot foreign exchange rate rises to $1.40/£1 and the lira spot foreign exchange rate rises to $0.17/TL1 over the year.c. Suppose that the FI funds the $250 million U.S. loans with $250 million one-year U.S. CD at a rate of 4 percent; funds $150 equivalent British loans with $150 million equivalent one-year pound CDs at a rate of 5 percent; funds $100 million equivalent Turkish loans with $100 million equivalent one-year Turkish lira CDs at a rate of 6 percent. Assume no other changes. What will the FI’s balance sheet look like…Q1-14 Suppose the expected spot rate (after 1 year) for euros (in terms of dollars) is $1.50, the current interest rate on euro deposits is 4.5%, and the current interest rate on dollar deposits is 5.5%. What current spot rate would satisfy the uncovered interest parity (UIP) equation? a. $1.65 b. $1.50 c. $1.25 d. $1.485