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eiteman_178963_im04 - Problem 4.1 Ringgit Up or Down...

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Problem 4.1 Ringgit Up or Down? Ringgit appreciation or depreciation? Assumptions Values Malaysian ringgit, before the crisis (RM/$) 2.7000 Malaysian ringgit, after the crisis (RM/$) 3.8000 Calculation percentage appreciation or depreciation Percentage change in the ringgitt -28.95% % chg = (S1-S2)/(S2) Because the ringgit fell in value: Depreciation
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Problem 4.2 Forward Premiums and Discounts Calculate the percentage premium or discount. Quoted 180-day Percent premium Assumptions Spot rate Forward rate or discount Days forward 180 European euro ($/euro) 0.8000 0.8160 4.0000% British pound ($/pound) 1.5620 1.5300 -4.0973% Japanese yen (yen/$) 120.00 118.00 3.3898% Swiss franc (SF/$) 1.6000 1.6200 -2.4691% Hong Kong dollar (HK$/$) 8.0000 7.8000 5.1282% Note that for the first two currency calculations ($/euro and $/pound), the calculation formula is: % premium = (F-S)/(S) x (360/180) While the calculation formula for the remaining currencies (all expressed as currency/$) is: % premium = (S-F)/(F) x (360/180)
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Problem 4.3 Trading in Switzerland Calculate the outright quotes Assumptions Values Spot exchange rate: Bid rate (SF/$) 1.6075 Ask rate (SF/$ 1.6085 One-month forward 10 to 15 3-months forward 14 to 22 6-months forward 20 to 30 a) Calculate outright quotes Bid Ask One-month forward 1.6085 1.6100 3-months forward 1.6089 1.6107 6-months forward 1.6095 1.6115 b) What do you notice about the spread? It widens, most likely a result of thinner and thinner trading volume.
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Problem 4.4 Spot and forward quotes for the yen Calculate the forward premiums for the yen in Exhibit 4.5. a) Yen (yen/$) Implied Calculated Assumptions Mid Rates Days Forward Forward Premium Spot 118.32 1 week 118.23 7 3.9149% 1 mo 117.82 30 5.0925% 2 mo 117.38 60 4.8049% 3 mo 116.91 90 4.8242% 4 mo 116.40 120 4.9485% 5 mo 115.94 150 4.9267% 6 mo 115.45 180 4.9718% 9 mo 114.00 270 5.0526% 1 yr 112.50 360 5.1733% 2 yr 106.93 720 5.3259% 3 yr 101.09 1,080 5.6814% 4 yr 96.82 1,440 5.5515% 5 yr 92.91 1,800 5.4698% Forward premium = (S-F)/(F) x (360/days) b) The premium is gradually getting larger as the maturity lengthens to one year. After one year it seemingly stabilizes at about 5.5% to 5.6%.
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Problem 4.5 Spot and forward quotes for the euro Calculate the forward premiums for the euro in Exhibit 4.5. a)
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eiteman_178963_im04 - Problem 4.1 Ringgit Up or Down...

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