Assume that you are a retail customer use the

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Assume that you are a retail customer. Use the information in the table below to answer the next 4 questions. Bid Ask Bid Ask S 0 ($/€) $1.40 = €1.00 $1.43 = €1.00 i $ 4.10% APR 4.20% APR F 360 ($/ €) $1.44 = €1.00 $1.49 = €1.00 i 3.50% APR 3.65% APR 41) If you borrowed $1,000,000 for one year, how much money would you owe at maturity? Borrowed $1,000,000 for one year, Interest rate = 4.2% Amount due after 1: $ 1,000,000 X 1.0420 = $ 1,042,000 42) If you had €1,000,000 and traded it for USD at the spot rate, how many USD would you get? We have €1,000,000, we sell euro at $1.40 = €1.00 $1.40 €1,000, 000 X ——— = $ 1,400,000 €1.00
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43) If you had €1,000,000 and took a position in USD in the forward market, how many USD would you get one year from now? This means we will sell euros forward at 1.44 $ received = €1,000,000 X 1.44 = $ 1,440,000 44) If you had €1,000,000 and lent for one year in the US market, how many USD would you get one year from now? $1.40 = €1.00 and I had €1,000,000, Converting euros today we get $1,400,000, Invest = 4.1% USD after 1 year = $1,400,000 X 1.041 = $1,457,400
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  • One '16
  • robert bai
  • Exchange Rate, Foreign exchange market, United States dollar

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