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 Rates60 Days0.5412Spot Exchange Rates30 Days90 Days0.5435British pound (pound / dollar)0.53760.5395The British pound is selling at ain 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 yourcompany 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 $627,791O $837,054O $795,201O $585,938Assume that the forward market is correct and the 60-day forward exchange rate quoted in the newspaper today (above) is the spot exchange rate 60days 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 ratefluctuations?O $4,733O $5,568$4,4540 $4,176

Answer 1:The correct answer is “discount” in the forward market.Justification: This is because of…

Answered: What are spot rates and forward rates?…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The current spot exchange rate is 1.27 $/ BP. Your customer is an importer from Britain. He will have to pay 10 million BP in three months. The following currency options (prices are in Dollars for BP delivery) are available: Which option will you recommend for hedging the BP liability (Put or Call)? Explain the customer the difference between the two strikes by comparing them to an unhedged position. In your explanation use as an example exchange rates of 1.35$/BP and 1.24$/BP in three months. Show (calculate) the payable total cost under the two exchange scenarios and three hedging choices (1: unhedged, 2: 1.25 strike hedge and 3: 1.30 hedge); you can disregard the time value of money of the premium payment.
Swissie Triangular Arbitrage. The following exchange rates are available to you. (You can buy or sell at the stated rates.) Assume you have an initial SF12,000,000. Can you make a profit via triangular arbitrage? If so, show the steps and calculate the amount of profit in Swiss francs (Swissies). Mt. Fuji Bank ¥92.00 = $1.00 Mt. Rushmore Bank SF 1.02 = $1.00 Mt. Blanc Bank ¥90.00 = SF 1.00
The yield on a 1-year bill in the U. K. is 7% and the present exchange rate is 1 pound = U. S. $1.65. If you expect the exchange rate to be 1 pound = U. S. $1.45 a year from now, the return a U. S. investor can expect to earn by investing in U. K. bills is a. 6.7% b. 3.2% c. 8% d. 5.97%
COURSE: INTERNATIONAL FINANCE Today you learned about following exchange rate quotes: (a) 1 KWD (Kuwaiti dinar) = 6.51747 Belarusian rubles (BYN).b) 1 BYN = 166.913 Kazakhstani tenges (KZT)You need to buy 2,000,000 Kazakh tenges (KZT) with Kuwaiti dinars (KWD), so how many dinars do you need for your purchase?
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Suppose your company imports computer motherboards from Singapore. The exchange rate is currently 1.3356 S$/US$. You have just placed an order for 30,000 motherboards at a cost to you of 218.50 Singapore dollars each. You will pay for the shipment when it arrives in 90 days. You can sell the motherboards for $175 each. a. Calculate your profit if the exchange rate stays the same over the next 90 days. Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. Calculate your profit if the exchange rate rises by 10 percent over the next 90 days. Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. c. Calculate your profit if the exchange rate falls by 10 percent over the next 90 days. Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. d. What is the break-even exchange rate? Note: Do not round…
Han Co wishes to predict the exchange rate between the dollar ($) and the euro (€), based on the following information: Spot exchange rate $1= €1.6515 Dollar interest rate 4.5% per year Euro interest rate 6.0% per year Which of the following is the one-year forward rate, using interest rate parity theory? O $1= €1.2386 O $1= €1.6752 O $1= €2.2020 O $1= €1.6281
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1.
Spot Exchange Rate is GBP 1.83155 = 1 OMR (For Immediate Delivery). Instead of buying GBP immediately you can enter into a contract with the bank to deliver the currency after 6 months. The bank has quoted 6 months forward rate as GBP1.83355 = 1 OMR. (Home Currency is OMR, which is given as Indirect quotes).
The Spot Exchange Rate is OMR 0.385030 = 1 USD and 90 days forward rate is OMR 0.394030 = 1USD (Home Currency is OMR, which is given as Direct quotes). Does the OMR is trading at premium or discount in 90 days forward market?
On January 31, 2019 the exchange rate between the US dollar and the euro was 1.14 USD/EUR. At the end of 2014, it was at 1.23 USD/EUR. a) Calculate the percentage change in the exchange rate. b) A shirt costs USD 40 in the US. How high can the price in Germany be, so that it is worth buying the shirt in Germany?

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