FINC6013 Workshop 2 Questions & Solutions
金融论文essay代写 Answer: The euro return to investing directly in euros is , so the euros available in 180 days is EUR10,000,000 1.05
Chapter 3 problems 金融论文essay代写
- If the spot exchange rate of the yen relative to the dollar is ¥105.75, and the 90-day forward rate is ¥103.25/$, is the dollar at a forward premium or discount? Express the premium or discount as a percentage per annum for a 360-day year?
Answer: When the forward rate of yen per dollar is less than the spot rate of yen per dollar, the dollar is said to be at a discount in the forward market. The magnitude of the discount is expressed in percentage per annum by dividing the difference between the forward rate and the spot rate by the spot rate and multiplying by reciprocal of the fraction of the year corresponding to the maturity of the forward contract (360/N days) and by 100. Thus, the annualized forward discount is 9.46% because
Notice that the word “discount” implies that the forward rate is less than the spot rate. 金融论文essay代写
3.As a foreign exchange trader for JPMorgan Chase, you have just called a trader at UBS to get quotes for the British pound for the spot, 30-day, 60-day, and 90-day forward rates. Your UBS counterpart stated, “We trade sterling at $1.7745-50, 47/44, 88/81, 125/115.” What cash flows would you pay and receive if you do a forward foreign exchange swap in which you swap into £5,000,000 at the 30-day rate and out of £5,000,000 at the 90-day rate?
Answer: The fact that you are swapping into £5,000,000 at the 30-day rate forward rate means that you are paying dollars and buying pounds. You would do this transaction at the bank’s 30-day forward ask rate. To find the forward ask rate, you must realize that the 30-day forward points of 47/44 indicate the amounts that must be subtracted from the spot bid and ask quotes to get the forward rates. We know to subtract the points because the first forward point is greater than the second. Hence, the first part of the swap would be done at $1.7750/£ - $0.0044/£ = $1.7706/£. Therefore, to buy £5,000,000 you would pay
$1.7706/£ £5,000,000 = $8,853,000 金融论文essay代写
In the second leg of the swap, you would sell £5,000,000 for dollars in the 90-day forward market. Because you are selling pound for dollars, you transact at the 90-day forward bid rate of $1.7745/£ - $0.0125/£ = $1.7620/£. Therefore, you would receive
$1.7620/£ £5,000,000 = $8,810,000
Notice that you get back fewer dollars than you paid, but you had use of £5,000,000 for 60 days. Thus, the pound must be the higher interest rate currency.
4.Consider the following spot and forward rates for the yen–euro exchange rates:
Spot | 30 days | 60 days | 90 days | 180 days | 360 days |
146.30 | 145.75 | 145.15 | 144.75 | 143.37 | 137.85 |
Is the euro at a forward premium or discount? What are the magnitudes of the forward premiums or discounts when quoted in percentage per annum for a 360-day year? 金融论文essay代写
Answer: The forward rates of yen per euro are lower than the spot rates. Therefore, the euro is at a discount in the forward market. The annualized forward premium or discount for the N day forward contract is
If the value of this calculation is negative, say -2%, we say there is a 2% discount. Therefore, the discounts are 4.51% for 30 days, 4.72% for 60 days, 4.24% for 90 days, 4.01% for 180 days, and 5.78% for 360 days.
5.As a currency trader, you see the following quotes on your computer screen:
Exch. Rate | Spot | 1-month | 2-month | 3-month | 6-month |
USD/EUR | 1.0435/45 | 20/25 | 52/62 | 75/90 | 97/115 |
JPY/USD | 98.75/85 | 12/10 | 20/16 | 25/19 | 45/35 |
USD/GBP | 1.6623/33 | 30/35 | 62/75 | 95/110 | 120/130 |
What are the outright forward bid and ask quotes for the USD/EUR at the 3-month maturity? 金融论文essay代写
Answer: The spot bid and ask quotes for USD/EUR are 1.0435/45. These quotes mean that the bank buys euros with dollars spot at $1.0435/€, and the bank sells euros for dollars at $1.0445/€. Because the forward points at the 3-month maturity are 75/90, we know that we must add the points to get the outright forward bid and ask rates. Adding the points makes the bid-ask spread in the forward market larger than the bid-ask spread in the spot market. Consequently, the forward bid rate is $1.0435/€ + $0.0075/€ = $1.0510/€, and the forward ask quote is $1.0445/€ + $0.0090/€ = $1.0535/€.
- Suppose you want to swap out of $10,000,000 and into yen for 2 months. What are the cash flows associated with the swap?
Answer: When you swap out of $10,000,000 into yen in the spot market, you are selling dollars to the bank. The bank buys dollars at its low bid rate of ¥98.75/$, so you get
¥98.75/$ $10,000,000 = ¥987,500,000
When you contract to buy the $10,000,000 back from the bank in the 2-month forward market, you must pay the bank’s ask rate of
¥98.85/$ - ¥00.16/$ = ¥98.69/$ 金融论文代写
You subtract the points because the 2-month forward quote is 20/16. Subtracting the points makes the bid-ask spread in the forward market larger than the bid-ask spread in the spot market. Hence, the amount of yen you pay is
¥98.69/$ $10,000,000 = ¥986,900,000
- If one of your corporate customers calls you and wants to buy pounds with dollars in 6 months, what price would you quote?
Answer: If the customer wants to buy pounds with dollars, the customer must pay the bank’s 6-month ask rate. The spot quotes are 1.6623/33 which means the spot ask rate is $1.6633/£. The 6-month forward points are 120/130. We add the points because the first one, 120, is less than the second, 130. Hence, the outright forward quote would be
$1.6633/£ + $0.0130/£ = $1.6763/£
Chapter 6 problems 金融论文essay代写
- Carla Heinz is a portfolio manager for Deutsche Bank. She is considering two alternative investments of EUR10,000,000. Either she will invest in euro deposits or she will invest in Swiss francs (CHF) for 180 days. In the latter case, she knows that she must worry about transaction foreign exchange risk, so she has decided to fully hedge her investment. Suppose she has the following data:
180-day Swiss franc deposits: | 8.0% p.a. |
180-day euro deposits: | 10.0% p.a. |
Spot exchange rate: | EUR1.1960/CHF |
180-day forward exchange rate: | EUR1.2024/CHF |
Which of these deposits provides the higher euro return in 180 days? If these were actually market prices, what would you expect to happen?
Answer: The euro return to investing directly in euros is , so the euros available in 180 days is EUR10,000,000 1.05 = EUR10,500,000. Alternatively, the EUR10,000,000 can be converted into Swiss francs at the spot rate of EUR1.1960/CHF. The Swiss francs purchased would equal EUR10,000,000 / EUR1.1960/CHF = CHF8,361,204. This amount of Swiss francs can be invested to provide a return over the next 180 days. Hence, interest plus principal on the Swiss francs is CHF8,361,204 1.04 = CHF8,695,652. If we sell this amount of Swiss francs forward for euros at the 180-day forward rate of EUR1.2024/CHF, we get a euro return of CHF8,695,652 EUR1.2024/CHF = EUR10,455,652. This is less than the return from investing directly in euros. 金融论文essay代写
If these were the actual market prices, you should expect investors to do covered interest arbitrages. Investors would borrow Swiss francs, which would tend to drive the CHF interest rate up; they would sell the Swiss francs for euros in the spot foreign exchange market, which would tend to lower the spot rate of EUR/CHF; they would deposit euros, which would tend to drive the EUR interest rate down; and they would contract to buy CHF with EUR in the 180-day forward market, which would put upward pressure on the forward rate of EUR/CHF. Each of these actions would help bring the market back to equilibrium.
- Suppose the Swiss franc–dollar exchange rate is CHF1.4706/$ in the spot market, and the 180-day forward rate is CHF1.4295/$. If the 180-day dollar interest rate is 7% p.a., what is the annualized 180-day interest rate on Swiss francs that would prevent arbitrage? 金融论文essay代写
Answer: Interest rate parity requires equality of the return to investing in CHF versus converting the CHF principal into dollars, investing the dollars, and selling the dollar principal plus interest in the forward market for CHF:
If we de-annualize the dollar interest rate, we find that the 180 day interest rate is 0.035. Hence, the Swiss franc interest rate that prevents arbitrage is
If we annualize this value, we find 0.0061 (100) (360/180) = 1.22%. 金融论文essay代写
更多代写：cs代写 计量经济代考 机器学习代写 r语言代写 宏观经济quiz代考
发表回复
要发表评论，您必须先登录。