International Finance

Assume the quotes in" rel="nofollow">indicated below are from a dealer in" rel="nofollow">in the NY currency market. Forward prices are quoted as the absolute forward premium or discount (not percentage) in" rel="nofollow">in basis poin" rel="nofollow">ints (one basis poin" rel="nofollow">int = .0001). Forward exchange rates 1a. If the dealer’s spot market quotes for the euro (€) are 1.0732 1.0734, and the dealer’s 6-month forward quotes for the euro are: 99 100, what are the dealer’s effective 6-month forward bid and ask prices for the euro? b. If a customer were to enter a forward contract with this dealer to sell $1m to obtain" rel="nofollow">in euros, how many euros would the customer receive in" rel="nofollow">in 6 months? 2a. If the dealer’s spot market quotes for the New Zealand dollar (NZ$) are: 0.7209 0.7212, and the dealer’s 1-year forward quotes for the New Zealand dollar are: -77 -70, what are the dealer’s effective 1-year forward bid and ask prices for the New Zealand dollar? b. If a customer were to enter a forward contract with this dealer to sell NZ$1m to obtain" rel="nofollow">in US dollars, how many US dollars would the customer receive in" rel="nofollow">in one year? 3a. If the dealer’s spot market quotes for the Swiss framc are 0.9994 0.9996, and the dealer’s 3-month forward quotes for the franc are: -55 -54, what are the dealer’s effective 3-month forward bid and ask prices for the Swiss franc? b. If a customer were to enter a forward contract with this dealer to sell $1m to obtain" rel="nofollow">in Swiss francs, how many francs would the customer receive in" rel="nofollow">in 3 months? 4a. If the dealer’s spot market quotes for the Brazilian real are: 3.1676 3.1706, and the dealer’s 9-month forward quotes for the real are: 192 201, what are the dealer’s effective 9-month forward bid and ask prices for the Brazilian real? b. If a customer were to enter a 9-month forward contract with this dealer to sell R$1m to obtain" rel="nofollow">in US dollars, how many US dollars would the customer receive in" rel="nofollow">in 9 months? 5. If forward prices are used as an in" rel="nofollow">indicator of the likely in" rel="nofollow">increase or decrease in" rel="nofollow">in value of a currency, which of the foreign currencies above are expected to in" rel="nofollow">increase in" rel="nofollow">in value over the in" rel="nofollow">indicated time period, and which are expected to decrease in" rel="nofollow">in value?