b. What contract rate will be used?
c. Suppose at the settlement date the following DNRIBOR rates apply
period
3
6
9
12
(in months)
DNRIBOR rate
4.90%
5.10%
5.20%
5.30%
Q 01.
Suppose you(r firm) knows you need to borrow an amount of 150.000 CNY eight months from now
i
r
i
c
t
F
Q 02.
Suppose you(r firm) knows you can invest an amount of 245.000 DNR three months from now for a

What is the settlement amount exchanged in the FRA?
d. Do you make or loose money on the FRA?
e. Now suppose that whenever you borrow you pay 0.75% above DNRIBOR at any maturity and receiv
Exactly how much money are you left with nine months from now? What is the corresponding ef
a.
(you sell, because you are a lender) a 3 by 9 FRA for a principal amount of 245,00
b.
3.850%
i.e. the 3 month forward 6 month rate
c.
reference rate
contract rate
principal
contract period
settlement sum
A
FRA
5.100%
3.850%
245,000.00
0.500
1,493.17
d.
the contract rate is below the reference rate, therefore you will have to pay (you c
e.
3 months from now you will invest the 245000 DNR that you have at your disposa
9 months from now you will receive back the balance including the interest on it o
so
time in months
cash flow
0
245,000.00
6
249,107.48
effective interest rate
3.35%
which is indeed 0,5% below the
Current ZCBIBOR rates are given below
period
1
5
6
11
12
(in months)
ZCBIBOR rate
7.45%
7.66%
7.69%
8.31%
8.44%
a. What are the specifications of the FRA you will use?
b. What contract rate will be used?
c. Suppose at the settlement date the following ZCBIBOR rates apply
period
1
5
6
11
12
(in months)
ZCBIBOR rate
7.17%
8.11%
8.65%
8.79%
9.00%
What is the settlement amount exchanged in the FRA?
d. Do you make or loose money on the FRA?
e. Now suppose that whenever you borrow you pay 0.66% above ZCBIBOR at any maturity and receive
Exactly how much money are you left with nine months from now? What is the corresponding ef
a.
(you sell, because you are a lender) a 1 by 6 FRA for a principal amount of 1.459.
b.
7.738%
i.e. the 1 month forward 5 month rate
c.
reference rate
contract rate
principal
contract period
settlement sum
A
FRA
8.110%
7.738%
1,459,366.00
0.417
2,188.08
d.
the contract rate is below the reference rate, therefore you will have to pay (you c
i
r
i
c
t
F
Q 03.
Suppose you(r firm) knows you can invest an amount of 1.459.366 ZCB one month from now for a
i
r
i
c
t
F

e.
1 month from now you will invest the 1459366 ZCB that you have at your disposa
6 months from now you will receive back the balance including the interest on it o
so
time in months
cash flow
0
1,459,366.00
5
1,504,111.19
effective interest rate
7.359%
which is indeed 0,38% below the

12
3.70%
12
5.40%
1% below CNYIBOR whenever you invest.
ponding effective interest rate?
150,000 CNY
can also identify this direction by the minus sign in the settlement sum)
4,8%+1% = 5,8% and borrow a further 246,06 CNY to pay to your counterparty in the FRA
erest on it of 150000*5,8%*4/12
contract rate
w for a four month period. In order to cover this obligation you want to enter into an FRA.Current CNYIBOR ra
a six month period. In order to fix conditions for this excess cash you want to enter into an FRA.

ve 0.50% below DNRIBOR whenever you invest.

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- Fall '10
- Bart Vinck
- Exchange Rate, Net Present Value, Forward contract, USD