The following market data relate to USD and Yen rates: Spot USD/YEN 116.00 3 months dollar deposit rate 4.5% 6 months dollar deposit rate 5% 3 months yen deposit rate 0.25% 6 months yen deposit rate 0.25% FRA rate for yen is nil a.What is a forward rate agreement?  B .What would be the 6 month USD/Yen forward rate? C .What should be the 3 month USD FRA rate 3 months forward?  D .The 6 and 12 month USD libors are 5% and 6.5% respectively. What should your bank do if another bank is quoting 6/12 USD FRA at 6.5 -6.75%?

Q: The following information on interest rates and exchange rates is available to all with access to…

A: Spot and forward markets are used to manage foreign currency risk, which arises from fluctuations in…

Q: what is the 6-month forward exchange rate? Do not round intermediate calculations. Round your answer…

A: Information Provided: Nominal rate (T-Bills) = 3% (Six-months) Japanese bonds nominal rate = 1.45%…

Q: Suppose the spot $/¥ exchange rate is 0.007, the I -year continuously compound dollar - denominated…

A: The forward exchange rate refers to a contract where the rate at which the currencies can be traded…

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A: Forward Rate is that rate on which any person who wants to paid the amount in near future or…

Q: Assume that the 3 months JPY Libor (market interest rate) is 0.25% p.a., the 3 months USD Libor is…

A: Interest rate parity = Spot rate * (1+Rate of interest of quoting currency / 1+Rate of interest of…

Q: The one year forward premium for euro against the dollar is 4%. If the interest rate in the euro…

A: Forward Premium = 4% = 0.04Interest Rate in the Foreign Currency = 4.5% = 0.045

Q: Let the U.S. dollar-yen spot rate be ¥120/$. Also, let the 180-day forward exchange rate be…

A: Calculation- Forward discount = [[forward exchange rate - spot exchange rate)/ spot exchange…

Q: The current USD/euro exchange rate is 1.4000 dollar per euro. The six month forward exchange rate is…

A: Given Information : Current USD/Euro Exchange rate = 1.400 dollar per euro Six month forward…

Q: In a recent e-news, you observe that the 6-month forward rate is $1.5031 / Euro. Further, if you…

A: To determine if arbitrage profit is possible, we need to analyze the interest rate parity and…

Q: One has the following data regarding spot and 18 month forward for USDCHF Spot 1.2000 F 1.1200 # of…

A: The arbitrage in the market refers to the profits that the investors can earn because of the…

Q: Suppose a German importer owes an Australian exporting company 150,000 AUD, due in three months.…

A: Expected spot rate is the rate at which an investor expects the currency to be traded after a…

Q: How much money have you made or lost?

A: The relative worth of two currencies, or the amount of one currency that may be exchanged for one…

Q: 1. Given the following data on 13th March 2007: Interest rate on 12-month German T-bills: 4%…

A: Given: Spot exchange Rate, 1 Euro, S=154.2 Yen Interest rate German t bill, Rhome= 4% Interest rate…

Q: The following current rates have been observed: Spot exchange rate: $1.25/SFr Expected future spot…

A: Interest rate perity is a forex management theory that establishes relationship between money market…

Q: The current five‑year Euro yen and Eurodollar rates are 8% and 12.5% per year, respectively. What is…

A: Implied premium = (1+EURO Dollar)5/(1+EURO Yen)5-1

Q: In January, the one year interest rate is 8.56% in the UK and 5.85% in the US. If the current…

A: Exchange rate is that which help in settlement of another country tradeing. It is that rate which…

Q: David estimated a six-month forward rate of C$1.01 per US$. The six-month US$ interest rate is…

A: Forward rate = F = 1.01Spot rate =  S = 1.02USD interest rate = 4%/100 = 0.04 in decimalsTo find:…

Q: Suppose the spot rate and forward rate for the British pound are $1.4248 and $1.4179 respectively.…

A: Forward Contract refers to the contract between two parties to transact on a specified date at a…

Q: 6-month forward rate = €1.20/£ Euro-zone interest rate = 3% p.a. U.K. interest rate = 2% p.a. What…

A: Based on the interest rate parity the spot rate and forward rate should be in equilibrium with each…

Q: If the 4 month forward exchange rate is €:$= 1.2500 and the spot rate is €:$ = 1.2800, culate the…

A: “Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only…

Q: CALCULATE THE FORWARD PER ANUM premium OR DISCOUNT. The pound sterling is quoted against the dollar…

A: Given: Spot rate = $1.8000 Forward rate = $1.78 Pound sterling is quoted against the dollar spot…

Q: 1)  Assume the following exchange rates are indirect quotes, what are the equivalent direct quotes…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: A swap bank makes the following quotes for 5-year currency swaps: USD EUR Bid Ask Bid Ask 5% 5.5% 7%…

A: In a currency swap, two parties exchange a specified amount of two different currencies and then…

Q: If Treasury bills are currently paying 6.35 percent and the inflation rate is 1.6 percent, what is…

A: The question is related to the approximate real rate and exact real rate. Bothe the rates are…

Q: The $/£ spot rate is $1.60/£1. The UK interest rate is 4% and the US interest rate is 9%. Calculate…

A: Spot rate (USD/GBP): $1.60/£1UK interest rate id = 4% US interest rate if = 9%

Q: What is the present value of the market-maker's net cash flow if spot rates are 102 instead?

A: Present value (PV) is the current value of a future sum of money or stream of cash flow given a…

Q: a. Does IRP hold? IRP -Select- b. According to PPP, what is the expected spot rate of the euro in…

A: We can determine the IRP using the formula below:Since the computed value does not equal the quoted…

Q: Suppose that the U.S. interest rate on one year Treasury notes was 4.5%. We will use this as the…

A: Arbitrage opportunities are risk free opportunities available due to misspricing in two different…

Q: According to this morning's The National Post, you can exchange $1 for $0.77 U.S. in three months.…

A: The exchange rates can fluctuate and are influenced by various factors such as economic conditions,…

Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.