Exchange Rate Se(5/6) $1.45 €1.00 F360 ($/) $1.48 - €1.00 Options: A. $159.22 B. $153.10 C. $439.42 D. none of the options Interest Rate APR is 4% 3%
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- Find the hedge ratio a 1-period at-the-money put option on ¥300,000. The spot exchange rate is ¥100 = $1.00. In the next period, the yen can increase in dollar value by 15 percent or decrease by 10 percent. The risk-free rate in dollars is i$ = 5%; The risk-free rate in yen is i¥ = 1%. A.-0.44 B.-0.66 C.-0.60 D.-0.40If spot AUD/USD = 0.7351, 255 day interest rates are : AUD = 2%, USD = 2.9%, the implied 255 day AUD/USD FX swap rate is: a. -0.0047 b. 0.0048 c. 0.0049 d. -0.0046 PLEASE EXPLAIN HOW YOU COME UP WITH THE ANSWER, THANK YOUSuppose we wish to borrow $10 million for 3 months, and that the quoted Eurodollar futures price is 94.80. If the interest rate on the loan is based on the 3-month LIBOR rate, what will we pay to repay the loan (that is, the total amount we need to repay including principal and interest based on LIBOR)? Question 16 options: $10, 160, 000.00 $10, 130,000.00 $10, 115,000.00 $10, 640,000.00 $10,520,000.00
- Q2) Suppose the current one-year euro swap rate y0[0, 1] is 1.74%, and the two-yearand three-year swap rates are 2.24% and 2.55% respectively. Euro swap rates are quotedwith annual payments and 30/360 daycount (thus α = 1). A hedge fund(HF) executes the following two trades with a dealer:1(1) The HF pays fixed and receives floating on e100 million notional of a one-year swap atthe forward swap rate.(2) The HF receives fixed and pays floating on e100 million notional of a three-year swapat the forward swap rate.Assume bid-offer costs are negligible.a) After one year, what net cashflow has the dealer paid to (or received from) the HF?b) Suppose after one year, one-year and two-year euro swap rates are unchanged. What isthe current value of the remaining part of the HF trade?c) Suppose after one year, the one-year euro swap rate is unchanged but the two-year euroswap rate is now Y%. What value of Y gives a total zero profit on the trade (at T = 1)?d) Do you like the trades the HF…If the exchange at time t is Et = €1.2/$. You invest $1 in an euro asset at t, which has an interest of 8%. When the asset expires at t+1, you get paid € (x.x round UP to one decimal place). If Et+1 = €1.02/$, then your rate of return in terms of € is % (round to the nearest integer). Question 8 options: Blank # 1 Blank # 23. You are to receive €400,000 in 90 days. a) Demonstrate how you would set up an options hedge. b) If the spot rate in 90 days is $1.10/€1.00. You receive the €400,000 and you exchange the euros into dollars. What is the net amount of dollars you receive and what is the dollar/euro exchange rate for the €400,000?
- Assume the Eurodollar futures price at time t0 is 93.83 and the contract expires in 3 months time a. Calculate the 3-month forward rate implied by this price. b. Calculate the repayment amount for bonds with maturities of 3, 6, 9 and 12 months if the investor bought $5 million future contracts. no hand written solution plzSuppose that you are a swap bank and you notice that interest rates on coupon bonds are as shown. Develop the 3-year bid price of a euro swap quoted against flat USD LIBOR. The current spot exchange rate is $1.50 per €1.00. The size of the swap is €40 million versus $60 million. Rates USD Euro In other words, what will you be willing to pay in euro against receiving USD LIBOR? O 6 percent O5 percent none of the options 3-year $ 7% € 5% 7 percentQuestion I: 4%, and re = 3%, u = 1.2, d 0.9, T = 0.75, Suppose that the exchange rate is $0.92/€. Let r's number of binomial periods = 3, and K = $0.85. Use Binomial Option pricing to answer the following two questions. (a) What is the price of a 9-month European call? (b) What is the price of a 9-month American call? Question II: Use the same inputs as in the previous (first) question, except that K = $1.00. 1 (a) What is the price of a 9-month European put? (b) What is the price of a 9-month American put?
- Suppose the September Eurodollar futures contract has a price of 96.4. You plan to borrow $50m for 3 months in September at LIBOR, and you intend to use the Eurodollar contract to hedge your borrowing rate. a. What rate can you secure? b. Will you be long or short the Eurodollar contract? c. How many contracts will you enter into? d. Assuming the true 3-month LIBOR is 1% in September, what is the settlement in dollars at expiration of the futures contract? (For purposes of this question, ignore daily marking-to-market on the futures contract.)You have account receivables: ₤5 m in one year. o InterestUS: 6.10% per annum & InterestUK: 9% per annum o Spot exchange rate: $1.50/£ & Forward exchange rate: $1.46/£ (1-year maturity) o Put option strike price: $1.46/£ & Put option premium: $0.02/£ How much will you receive in $ if you use the money market hedge?A currency speculator wants to speculate on the future movements of the €. The speculator expects the € to appreciate in the near future and decides to concentrate on the nearby contract. The broker requires a 2% Initial Margin (IM) and the Maintenance Margin (MM) is 75% of IM. Following € Futures quotes are currently available from the Chicago Mercantile Exchange (CME). Euro (CME) - €125,000; $/€ Open High Low Settle Change Open Interest June 1.2216 1.2276 1.2175 1.2259 -0.0018 255,420 Sept 1.2229 1.2288 1.2189 1.2269 - 0.0018 19,335 In addition to the information provided above, consider the following CME quotes that are available at the end of day one’s trading: Euro (CME) - €125,000; $/€ Open High Low Settle Change Open Interest June 1.2216 1.2276 1.2175 1.2176 -0.0083…
