Your foreign exchange trader in the United States has quoted the following rates for the Swiss Francs spot, 1-month, 3-month, and 6 month: $0.5965/72 50/61 127/143 242/267 a. If/you wished to buy 1,000,000 3-month Swiss Francs, how much would you pay in dollars? b. If you wanted to buy 1,000,000 6-month dollars, how much would you pay in Swiss Francs? .C. In New York, three month treasury bills yield 11% per annum, Using ask quotes only for simplicity, calculate the yields on Swiss three-month bills.
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- an investor has $2m to invest and has the option of placing it in a us bank account paying 2% annually, or in a german bank, where the annual rate of interest is only 2.5%. if the current exchange rate for the euro is given as $1.4250, at what 1-year dollar-euro forward rate of exchange would the investor get the same return from investing in the us as he/she would by investing in germany?An investor has $2m to invest and has the option of placing it in a US bank account paying 2% annually, or in a German bank, where the annual rate of interest is only 2.5%. If the current exchange rate for the Euro is given as $1.4250, at what 1-year Dollar-Euro forward rate of exchange would the investor get the same return from investing in the US as he/she would by investing in Germany? Please show your work.Consider a U.S.-based company that exports goods to Switzerland. The U.S. company expects to receive a payment of 50,000 Swiss Francs (CHF) on a shipment of goods in 6 months' time. The U.S. interest rate is 2% p.a., and the Swiss interest rate is 4% p.a. Assume that the current spot rate is CHF0.96/USD. Which of the following statements is correct: The risk to the U.S. company is that the value of the Swiss franc will rise and therefore it should enter into a contract to buy Swiss francs forward The risk to the U.S. company is that the value of the Swiss franc will decline and therefore it should enter into a contract to buy Swiss francs forward The risk to the U.S. company is that the value of the Swiss franc will decline and therefore it should enter into a contract to sell Swiss francs forward The risk to the U.S. company is that the value of the Swiss franc will rise and therefore it should enter into a contract to sell Swiss francs forward
- Assume Switzerland has a one-year interest rate of 3% and that of Ghana is 16%. If the International Fisher Effect( IFE) holds, what would your forecast for Swiss franc exchange rate with respect to the cedi be for a one-year period? Assume that the initial exchange rate is 5000 cedis to a Swiss franc.An investor has $10m to invest and has the following options: 1) depositing it in a US bank account paying 3% annually, or 2) depositing it in a German bank, where the annual rate of interest is only 2%. Assume that today the current spot exchange rate for the Euro is given as $1.2750, while the 1-year Dollar-Euro forward rate is posted as 1.2995. a. Based on your knowledge of the relationship between interest rate differentials and the current dollar-euro forward premium or discount, in which country should the investor deposit her money? why? b. If you had the power to adjust the German interest rate, with all else constant, what rate would you establish, such that the investor is totally indifferent between depositing in either countries? Show your work and the logic behind it.Currently, the spot exchange rate is CHF 0.89/$ and the three-month forward exchange rate is CHF 0.86/$. The three-month interest rate is 5.6% per annum in the U.S. and 4.0% per annum in Switzerland. Assume that you can borrow as much as $1,120,000 or CHF 1,000,000. Determine whether the interest rate parity is currently holding. If the IRP is not holding, how would you carry out covered interest arbitrage? Show all the steps and determine the arbitrage profit. Explain how the IRP will be restored as a result of covered arbitrage activities.
- James Clark is a foreign exchange trader with Citibank. He notices the following quotes: Spot exchange rate USD 1.2051/CHF One-year forward exchange rate USD 1.1922/CHF One-year $ interest rate 8% per year One-year CHF interest rate 10% per year Is there an arbitrage opportunity? If yes, determine the arbitrage profit in Swiss Francs. Assume that James Clark is authorized to work with $1,000,000.1. The foreign exchange market for Swiss francs (CHF) is shown below; the U.S. dollar is the pricing currency and the current exchange rate is $1.05/CHF. es/CHF 1.05/CHF = e D QCHF millionsAssume that you are a Canadian living in Canada, and have $1,000CDN and you are debating about where to invest it for one year: in Canada or in the USA. Currently, the market interest rate in Canada (icAN) is 2.70% and in the USA, the market interest rate (jus) is 3.75%. The current exchange rate is $1.3107USD= $1CAD. The spot exchange rate (R) has US currency in the denominator and Canadian currency in the numerator. The forward exchange rate (F) is the spot exchange rate one year from now. Using above information, complete the below statements, filling in your final, complete answer in the space/box provided to the right of the statement. Do not show your work.
- What are spot rates and forward rates? Suppose you open the newspaper today and observe the following indirect exchange rate quotations for the British pound: Forward Exchange Rates 60 Days 0.5412 Spot Exchange Rates 30 Days 90 Days 0.5435 British pound (pound / dollar) 0.5376 0.5395 The British pound is selling at a in the forward market. Suppose you make a E 450,000 sale to a British customer who has 60 days to pay you in cash. The customer will pay you in British pounds, but your company is based in the United States, so you are most concerned with the dollar value of the payment. If the customer pays you E 450,000 today, how much is that worth in dollars? O $627,791 O $837,054 O $795,201 O $585,938 Assume that the forward market is correct and the 60-day forward exchange rate quoted in the newspaper today (above) is the spot exchange rate 60 days from now. If the customer waits the full 60 days and pays you £450,000, how much have you lost (in dollar terms) due to exchange rate…Suppose that a French firm would like to have its stock available through an American Depository Receipt (ADR). If the firm’s stock is currently selling for €75 and that the exchange rate between the € and the $ is €1.0=$1.0592. What price should we expect for the ADR in US dollars? Suppose that over the next year the dollar reaches parity with the Euro, i.e., $1.00=€1.00 and that the price of the French firm’s stock rises to €100. What would expect the price of the ADR to be?Currently, the spot exchange rate is CHF 0.89/$ and the three-month forward exchange rate is CHF 0.86/$. The three-month interest rate is 5.6% per annum in the U.S. and 4.0% per annum in Switzerland. Assume that you can borrow as much as $1,120,000 or CHF 1,000,000. A. Determine whether the interest rate parity is currently holding. B. If the IRP is not holding, how would you carry out covered interest arbitrage? Show all the steps and determine the arbitrage profit. C. Explain how the IRP will be restored as a result of covered arbitrage activities.