fbe436 hw4 solution

# S us uk germany japan france canada 1 15860 07241

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Unformatted text preview: 1 FBE 436 Answers to Problem Set #4 (days) U.S. U.K. Germany Spot Forward Spot 1 1 1.58600 0.72410 0.01198 0.20602 0.73540 U.K. 0.6305 0.6319 Germany 1.3810 1.3758 Japan 83.4500 82.3959 France 4.8539 4.8762 Canada 1.3598 1.3644 U.S. /\$ 1 1 7.000% U.K. /& 1.5860 1.5826 1 1 2.1903 4.600% Germany 0.7241 0.7268 0.4566 0.4593 1 1 1.000% Japan 0.0120 0.0121 0.0076 0.0077 0.0165 0.0167 8.000% France 0.2060 0.2051 0.1299 0.1296 0.2845 0.2821 7.500% Canada 0.7354 0.7329 0.4637 0.4631 1.0156 1.0084 U.S. Forward Spot Canada Forward Interest Rates: 6.130% Spot France Spot Spot/Forward (\$/fc): Forward Japan Forward Spot Forward 2.1774 132.3517 130.4006 7.6983 7.7172 2.1566 2.1593 60.4261 60.6546 3.5147 3.5442 0.9846 0.9917 0.0582 0.0592 0.0163 0.0166 17.1924 16.8974 1 1 0.2801 0.2798 61.3691 60.3902 3.5696 3.5739 1 1 1 1 Application of two principles. The CIRP equation. The triangular arbitrage principle. In ALL cases, you have the spot rate and the “home” and “foreign” interest rates. Consider all the cells in the northeast part of the matrix (northeast of the cells with 1s). You can compute all the spot rates there as either the inverse of the rates you already have or as cross rates. You can compute the accompanying forward rates using CIRP (make sure you get the units correct). ALL the FX rates in the southwest part of the matrix (southwest of the cells with 1s) are inverses of the corresponding cells in the northeast part of the rectangle (or matrix). 10...
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## This note was uploaded on 01/16/2010 for the course FBE 436 at USC.

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