Forward premiums/discounts with bids/asks. Referring to the following spot and forward bid-ask rates for the US$/€ exchange rate, answer the questions that follow: a. Is the euro at a premium or discount vis-à-vis the U.S. dollar? b. What is the annualized forward premium or discount for each maturity?

Forward premiums/discounts with bids/asks. Referring to the following spot and forward bid-ask rates for the US$/€ exchange rate, answer the questions that follow: a. Is the euro at a premium or discount vis-à-vis the U.S. dollar? b. What is the annualized forward premium or discount for each maturity?

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter5: Currency Derivatives

Section: Chapter Questions

Problem 28QA

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Forward premiums/discounts with bids/asks. Referring to the following spot and forward bid-ask rates for the US$/€ exchange rate, answer the questions that follow: b. What is the annualized forward premium or discount for each maturity? c. Restate the bid-ask quotations as a euro price of one dollar. Is the dollar at a premium or discount vis-à-vis the euro? What is the annualized premium/discount for each maturity? Are they different from the results you obtained in part b? Why?
You observe the following quoted money market rates: Bid Ask Spot exchange rate AUD1.185/USD AUD1.189/USD 95-day Forward exchange rate AUD1.341/USD AUD1.349/USD 95-day USD interest rate 5.57% p.a. 6.38% p.a. 95-day AUD interest rate 7.71% p.a. 8.81% p.a. What will your profit (in USD) be 95 days from now if you borrow USD3 million today and invest in Australia and then convert back to USD? In your calculations assume 360 days per year. a. -USD 361,605.85 b. -USD 352,934.10 C. -USD 272,802.68 d. -USD322,300.31 e. None of the options in this question.
) 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?
The following table shows the midmarket (i.e., average of the bid and offer) for the current YEN/GBP spot exchange rate as well as for GBP and YEN 270-day LIBOR (annualized): Spot (YEN/GBP) 270-day LIBOR (GBP) 270-DAY LIBOR (YEN) 1.2089 5.25% 1.25% 1. What is the forward premium or discount for a 270-day forward contract for YEN/GBP?
Suppose that the spot rate for the euro is $1.5400 and with a forward premium of 2.00%. Which of the following most closely approximates the implied forward rate of the euro in this situation? O-$0.0016 O-$0.0031 O-$0.0047 O $1.5708
Bid/Ask on Dollar/Euro Forwards. Use the following spot and forward bid-ask rates for the U.S. dollar/euro (US$/€) from December 10, 2010, to answer the following questions: a. What is the mid-rate for each maturity? b. What is the annual forward premium for all maturities? (Click on the icon to import the table into a spreadsheet.) Period spot 1 month 2 months 3 months 6 months 12 months Bid Rate 1.3234 1.3233 1.3231 1.3227 1.3218 1.3197 Ask Rate D 1.3235 1.3234 1.3232 1.3229 1.3221 1.3201
Required: h) Determine for each, whether the interest parity condition holds or not, if ES = 1.10 $/€ (American terms) Please select the YES or NO in the last column of following table for your answers. Note: E denotes exchange rate. Interest rate for Dollar (R$) (%) 4 7 ·∞∞ 8 8 Interest rate for Euro (R€) (%) 2 2 6 4 Exchange rate of depreciation 2 5 0 3 (Uncovered) interest parity condition holds? YES/NO YES/NO YES/NO YES/NO
Suppose the exchange rate of euro at current spot market is $1.25/€. If a put option has a strike price of $1.18/€ then we can say this option is a) inthemoney b) outofthemoney c) atthemoney d) past breakeven
Suppose the exchange rate is $1.71/€. Let r$ = 2%, r€ = 7%, u = 1.16, d = 0.78, and T = 2. Using a 2-step binomial tree, calculate the value of a $1.70-strike American call option on the euro. a.$0.1253 b. $0.1220 c. $0.1118 d. $0.1196 e. $0.1172
Q.2: By considering the interest rate parity condition, answer each of the following: a. Why is the interest rate parity condition also the equilibrium condition for the exchange rate? b. By using the forward exchange rate, obtain the solution for the current spot equilibrium exchange rate. c. As of 29/03/2021 at 06:00 pm, 1 year forward S/TL rate in Reuters quotations is 9.73 $/TL. Spot interest rates for one-year maturity are 20% and 0.5% in Turkey and the US, respectively. Calculate the equilibrium exchange rate for the spot market in Turkey by using the interest rate parity condition. d. As of the same hour, the market closing rate is 8.15 S/TL. Evaluate the validity of the interest rate parity approach.
Suppose you observe the following exchange rates and interest rates for the USD and THB: Bid Ask USD/THB 30.01 30.31 USD/THB F,360 ? ? Trader lends at Trader borrows at I USD 1.55% 1.75% I THB 0.60% 0.85% Which answer is closest to the minimum forward ask (USD/THBAF,360) that prevents covered interest rate arbitrage? 25.29 29.67 30.13 30.97 29.97
b. What is the annual forward premium on the yen for all maturities? (Assume that the U.S. dollar is the home currency.) The annual forward premium is: Forward premium= The annual forward premium for all maturities is calculated below: Period Spot rateMid-Rate -Forward rateMid-Rate Forward rateMid-Rate Spot 1 month 2 months 3 months 6 months 12 months 24 months Days Forward 0 30 60 90 180 380 720 Bid Rate \/$ 85.60 86.20 86.03 85.57 84.43 84.17 83.11 x(360/Days) Ask Rate \/$ 85.65 86.24 86.08 85.61 84.46 84.21 83.16 Forward Premium -8.281 % -2.998 0.164 2.795 1.705 1.498