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Unformatted text preview: 1. A U.S. firm issues a €-denominated bond. The bond is a 1-year discount bond with a face value of €10,000 and a YTM of 8%. If the exchange rate is $1.36/€ when the bond is issued, and $1.45/€ when the bond matures, what is the U.S. firm’s cost of funding (COF) for the issue? ANS: 15.15% 2. Given current spot rates of $.1025/MXP and $0.8711/C$, what is the C$/MXP cross rate? ANS: C$.1177/MXP 3. Suppose the current spot rates are $.1025/MXP bid and $.1035/MXP ask, combined with current spot rates of $.8611/C$ bid and $.8643/C$ ask, what is the C$/MXP bid and ask prices? ANS: C$.1186/MXP bid C$.1202/MXP ask 4. Barclays’ bank posts the following quotes for £/$ exchange and $/C$ exchange dollar bids dollar asks C$ bids C$ asks Barclays’ quotes: £.602/$ £.608/$ $.745/C$ $.758/C$ Compute the cross exchange rate bid and ask prices (to three decimal place like those above) for C$/£ exchange. The £ is the base currency. ANS: C$2.170/₤ bid C$2.230/₤ ask 5. Given your answers to Q3, what is the bid-ask spread in percentage terms for the C$/MXP? ANS: 1.33% 6. Given a direct quote (from our SPFD, MO, USA perspective) for the euro of $1.2611/€, what is the indirect quote for the euro?...
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- Spring '12
- Exchange Rate, United States dollar, U.S. firm