Chapter_5_Q

Chapter_5_Q - Chapter 5 Currency Derivatives Suggested...

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Chapter 5 Currency Derivatives Suggested Homework Questions (updated 8/8/06) 1. The current 90-day forward rate for Swiss francs is $1.25/SF and you are sure the spot rate will be $1.30 three months (90 days) from now. What could you do with $2,000 to profit from this situation? (Explain the steps you would take today and 90 days from today assuming the spot rate 90 days from now actually is $1.30.) 2. Suppose the current 180-day forward rate for German euros is $1.50/€ and general expectations are that the spot rate in 180 days will be $1.45/€. What is likely to happen to the 180-day forward rate in the market place and why will it happen? 3. Suppose today's rates for the Canadian dollar are as follows: spot rate $0.65/CD, 30-day forward rate $0.67/CD, 90-day forward rate $0.70/CD, and 180-day forward rate $0.62/CD. What is the market anticipating the value of the US dollar to do over the next six months? 4. Suppose the current spot rate for the British pound is $1.56/£ and the premium is 2¢ for a May Call Option
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This note was uploaded on 03/26/2008 for the course FINC 445 taught by Professor Martindale during the Spring '08 term at Texas A&M.

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