This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: calculate the mid-rate, annual forward premium using the mid-rate, bid-ask spread for each maturity. Period Days Forward Bid Rate Ask Rate Mid-Rate Premium /Discount Bid-Ask Spread Spot 0.74140 0.74190 1 month 30 0.73983 0.74055 2 months 60 0.73871 0.73924 3 months 90 0.73752 0.73805 6 months 180 0.73412 0.73524 12 months 360 0.72870 0.73050 Question: What do you notice about the bid-ask spread as quotes evolve from spot towards forward 12 months? Why do you think this occurs? 5. (Synthetic Security) Talyor Inc, a small battery manufacturer in the U.S., wants to borrow 20 million Euros for 6 months. Because the company is almost unknown in Europe, it is unable to access the European money market directly. What would be the alternative given the following rates. The current spot rate is S($/€)=1.4; the six-month forward rate is F 6 ($/€)=1.42; The six-month interest rate in the US is 5.2% per annum....
View Full Document
This note was uploaded on 09/06/2011 for the course FIN 536 taught by Professor Staff during the Spring '11 term at S.F. State.
- Spring '11
- International Finance