ER Ch. 5 - Ch 5 An exchange rate quoted in American terms...

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Ch 5 An exchange rate quoted in American terms Answer Selected Answer: explains how many U.S. dollars one unit of foreign currency is worth. Considering the spot and forward rate quotations for the Swiss franc below, which of the following statements is true? Answer Selected Answer: The Swiss franc is trading at a forward premium. The spot and forward foreign exchange market is Answer Selected Answer: All of the above. Restate the following one–, three–, and six–month outright forward American term bid–ask quotes in forward points. ANSWER: Consider a trader who takes a long position in a six–month forward contract on the euro. The forward rate is $1.75 = €1.00 and the contract size is €62,500. At the maturity of the contract the spot exchange rate is $1.65 = €1.00. In this situation the trader has Answer Selected Answer: lost $6,250. Considering the spot and forward rate quotations for the Swiss franc below, calculate the three month forward premium in American terms. Assume 30–day months and 360–day years.
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