Chapter 21, Problem 1P

a.

Summary Introduction

To determine : Whether the Swiss franc is trading at a discount or at a premium in the forward market according to the Wall Street Journal.

Introduction:

Forward Market:

It refers to a marketplace that deals in foreign exchange wherein the trading of financial instruments takes place. It sets the price of financial instruments for future delivery.

b.

Summary Introduction

To calculate: The 30-day forward premium or discount rate as per the Wall Street Journal.

Introduction:

Forward Rate:

It refers to the interest rate applied to financial transactions that will take place at a future date. It keeps on fluctuating in the market. The purpose is to settle the transactions on a predetermined date.

c.

Summary Introduction

To calculate: The 90-day forward premium or discount rate as per the reports by the Wall Street Journal.

Introduction:

Forward Rate:

It refers to the interest rate applied to financial transactions that will take place at a future date. It keeps on fluctuating in the market. The purpose is to settle the transactions on a predetermined date.

d.

Summary Introduction

To calculate: The value of dollars Swiss could get over 90-days’ forward rate as per the Wall Street Journal.

Introduction:

Forward Rate:

It refers to the interest rate applied to financial transactions that will take place at a future date. It keeps on fluctuating in the market. The purpose is to settle the transactions on a predetermined date.

e.

Summary Introduction

To calculate: The number of francs that the Swiss bank could deliver in six months to get U.S dollars.

Introduction:

Forward Market:

It refers to a marketplace that deals in foreign exchange wherein the trading of financial instruments takes place. It sets the price of financial instruments for future delivery.