Chapter6 - Problem 5.1 Paris to St. Petersburg On your...

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Problem 5.1 Paris to St. Petersburg Assumptions Values Beginning your trip with euros 10,000.00 1.4260 Spot rate (Rubles/$) 24.75 a) Calculate the cross rate 35.29 b) What would be the proceeds in Rubles? Converting your euros into Rubles 352,935 On your post-graduation celebratory trip you are leaving Paris for St. Petersburg, Russia. You leave Paris with 10,000 euros in your money pouch. Wanting to exchange all of these for Russian rubles, you obtain the following quotes. Spot rate ($/ ) Cross rate (Rubles/ ) Rubles/ = Rubles/$ x $/
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Problem 5.2 Basel Trading Assumptions Values Spot exchange rate: Bid rate (SF/$) 1.2575 Ask rate (SF/$ 1.2585 One-month forward 10 to 15 3-months forward 14 to 22 6-months forward 20 to 30 a) Calculate outright quotes Bid Ask Spread One-month forward 1.2585 1.2600 0.0015 3-months forward 1.2589 1.2607 0.0018 6-months forward 1.2595 1.2615 0.0020 b) What do you notice about the spread? It widens, most likely a result of thinner and thinner trading volume. Added/optional question: What is the 6-month Swiss bill rate? Spot rate, midrate (SF/$) 1.2580 Six-month forward rate, midrate (SF/$) 1.2605 Maturity (days) 180 6-month US dollar treasury rate (yield) 4.200% Solving for implied SF interest rate 6.450% Check calculation: the six-month forward 1.2719 You receive the following quotes for Swiss francs against the dollar for spot, one-month forward, 3-months forward, and 6 months forward.
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Problem 5.3 Asian Financial Crisis Part a) July 1997 November 1997 Percentage Country Currency (per US$) (per US$ Change vs dollar China yuan 8.40 8.40 0.0% Hong Kong dollar 7.75 7.73 0.3% Indonesia rupiah 2,400 3,600 -33.3% Korea won 900 1,100 -18.2% Malaysia ringgit 2.50 3.50 -28.6% Philippines peso 27 34 -20.6% Singapore dollar 1.43 1.60 -10.6% Taiwan dollar 27.80 32.70 -15.0% Thailand baht 25.0 40.0 -37.5% Part b) The Asian financial crisis which began in July 1997 wreaked havoc throughout the currency markets of East Asia. Which of the following currencies had the largest depreciations or devaluations during the July to November period? Which seemingly survived the first five months of the crisis with the least impact on their currencies? The Chinese yuan's value against the US dollar, as a result of the Chinese government maintaining its peg to the dollar, did not change at all during the crisis. The Thai baht, however, fell 37.5% in only five months, with the Indonesian rupiah a close second with a loss of 33.3%.
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a) Calculate the mid-rates from the bid-ask rate quotes. b) Calculate the forward premium on the different maturities using the mid-rates from part a). Forward premium = ( Spot - Forward ) / (Forward) x (360 / days) a) b) Calculated Forward Period Days Forward Bid Rate Ask Rate Mid-Rate Premium spot 114.23 114.27 114.25000 1 month 30 113.82 113.87 113.84500 4.2690% 2 months 60 113.49 113.52 113.50500 3.9382% 3 months 90 113.05 113.11 113.08000 4.1387% 6 months 180 112.05 112.11 112.08000 3.8722% 12 months
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Chapter6 - Problem 5.1 Paris to St. Petersburg On your...

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