The Wall Street Journal reported the following spot and forward rates for the Swiss franc

The Wall Street Journal reported the following spot and forward rates for the Swiss franc:

Spot……………………$0.7876
30-day forward………$0.7918
90-day forward……… $0.7968
180-day forward………$0.8039

a. Was the Swiss franc selling at a discount or a premium in the forward market?
b. What was the 30-day forward premium (or discount)?
c. What was the 90-day forward premium (or discount)?
d. Suppose you executed a 90-day forward contract to exchange 100,000 Swiss francs into U.S. dollars. How many dollars would you get 90 days hence?
e. Assume a Swiss bank entered into a 180-day forward contract with Citicorp to buy $100,000. How many francs will the Swiss bank deliver in six months to get the U.S. dollars?

Click here for the solution: The Wall Street Journal reported the following spot and forward rates for the Swiss franc

(Forward Exchange Rate) Use the information in Figure 21.1 to answer the following questions

(Forward Exchange Rate) Use the information in Figure 21.1 to answer the following questions:

a) What is the six-month forward rate for the Japanese yen in yen per U.S. dollar? Is the yen selling at a premium or a discount? Explain.

b) What is the three-month forward rate for Canadian dollars in U.S. dollars per Canadian dollar? Is the dollar selling at a premium or a discount? Explain.

c) What do you think will happen to the value of the dollar relative to the yen and the pound, based on the information in the figure? Explain.

Click here for the solution: (Forward Exchange Rate) Use the information in Figure 21.1 to answer the following questions

(Using Spot and Forward Exchange Rates) Suppose the spot exchange rate for the Canadian dollar in Can $1.05 and the six- month forward rate is Can $1.07

(Using Spot and Forward Exchange Rates) Suppose the spot exchange rate for the Canadian dollar in Can $1.05 and the six- month forward rate is Can $1.07.

a) Which is worth more, a U.S. dollar or a Canadian dollar?

b) Assuming absolute PPP holds, what is the cost of the United States of an Elkhead beer if the price in Canada is Can$2.50? Why might the beer actually sell at a different price in the United States?

c) Is the U.S. dollar selling at a premium or a discount relative to the Canadian dollar?

d) Which currency is expected to appreciate in value?

e) Which county do you think has higher interest rates- the United States or Canada? Explain.

Click here for the solution: (Using Spot and Forward Exchange Rates) Suppose the spot exchange rate for the Canadian dollar in Can $1.05 and the six- month forward rate is Can $1.07