Question
In: Finance
Suppose that the U.S. dollar-pound sterling spot exchange rate equals e= $1.60/£, while the 360-day forward...
Suppose that the U.S. dollar-pound sterling spot exchange rate equals e= $1.60/£, while the 360-day forward rate is f 12 = $1.64/£. The yield on a one-year U.S. Treasury bill is i ($) = 9% and on a one-year U.K. Treasury bill the yield is i (£) = 8%. d. Is pound sterling selling at a forward premium or discount versus the U.S. dollar? Compute this value.
Solutions
jeff jeffy answered 2 years agoRelated Solutions
The $/£spot exchange rate is $1.60/£and the 180-day forward exchange rate is $1.59/£. Is $ trading...
The $/£spot exchange rate is $1.60/£and the 180-day forward
exchange rate is $1.59/£. Is $ trading at forward premium or
forward discount relative to £? What about £? Calculate the forward
premium (discount) for $ and £.
1.The current U.S. dollar-yen spot rate is 102¥/$. If the 90-day forward exchange rate is 101¥/$...
1.The current U.S. dollar-yen spot rate is 102¥/$. If
the 90-day forward exchange rate is 101¥/$ what is the forward
exchange premium or discount for ¥$.
2.Assume the current U.S. dollar-British spot rate is
0.71£/$. If the current nominal one-year interest rate in the U.S.
is 2.7% and the comparable rate in Britain is 3.9%, what is the
approximate forward exchange rate for 180 days?
Spot and forward exchange rates for the British pound are as follows: Spot exchange rate =...
Spot and forward exchange rates for the British pound are as
follows: Spot exchange rate = 1.4500 USD/GBP, 90-day forward
exchange rate =1.4416 USD/GBP, 180-day forward exchange rate =
1.4400 USD/GBP. Additionally, a 180-day European call option to buy
1 GBP for USD 1.42 costs 3 cents, and a 90-day European put option
to sell 1 GBP for USD 1.49 costs 3 cents. Which of the following is
the correct arbitrage strategy?
Select one:
Buy the 90-day forward contract and...
How does forward exchange rate differ from spot exchange rate? Suppose £ represents British pound and...
How does forward exchange rate differ from spot exchange
rate?
Suppose £ represents British pound and ¥ represents Japanese
yen. If E¥/£ = 150 in Tokyo while E¥/£ = 155
in London. How would you do arbitrage to make a profit?
What is the meaning of covered interest parity? How do you use
it to determine the forward exchange rate?
What is the meaning of uncovered interest parity? How do you
use it to determine the spot exchange rate?
Suppose that the spot and the forward exchange rates between the UK pound (£) and the...
Suppose that the spot and the forward exchange rates between the
UK pound (£) and the Euro (€) are S0=0.5108 £/€ and Ft=3
months=0.5168 £/€. The time to maturity of the forward contract is
3 months. The annual interest rate of £-denominated Eurocurrency
market deposits is 4.08%. The annual interest rate of
€-denominated, 3-month Eurocurrency market deposits is 3.15%.
a) Examine whether there exists an arbitrage opportunity.
b) Devise an arbitrage strategy. Describe the transactions and
calculate the arbitrage profits.
The Euro -Yen dollar spot rate is £$0.89/¥$. When the45-day forward exchange rate is £$0.90/¥$...
The Euro -Yen dollar spot rate is £$0.89/¥$. When the
45-day forward exchange rate is £$0.90/¥$ then the Euro forward
dollar is selling at
discount or premium of _________%
Suppose the spot exchange rate for the Canadian dollar is Can$1.29 and the six-month forward rate...
Suppose the spot exchange rate for the Canadian dollar is
Can$1.29 and the six-month forward rate is Can$1.31.
a.
Which is worth more, a U.S. dollar or a Canadian dollar?
U.S. dollar
Canadian dollar
b.
Assuming absolute PPP holds, what is the cost in the United
States of an Elkhead beer if the price in Canada is Can$2.50?
(Round your answer to 2 decimal places, e.g.,
32.16.)
c.
Is the U.S. dollar selling at a premium or a...
Daily Spot Exchange Rate, U.S. Dollars per Pound Sterling Date Rate Date Rate Date Rate 1-Apr-04...
Daily Spot Exchange Rate, U.S. Dollars per Pound
Sterling
Date
Rate
Date
Rate
Date
Rate
1-Apr-04
1.8564
13-Apr-04
1.8160
23-Apr-04
1.7674
2-Apr-04
1.8293
14-Apr-04
1.7902
26-Apr-04
1.7857
5-Apr-04
1.8140
15-Apr-04
1.7785
27-Apr-04
1.7925
6-Apr-04
1.8374
16-Apr-04
1.8004
28-Apr-04
1.7720
7-Apr-04
1.8410
19-Apr-04
1.8055
29-Apr-04
1.7751
8-Apr-04
1.8325
20-Apr-04
1.7914
30-Apr-04
1.7744
9-Apr-04
1.8322
21-Apr-04
1.7720
3-May-04
1.7720
12-Apr-04
1.8358
22-Apr-04
1.7684
4-May-04
1.7907
5-May-04
1.7932
13-May-04
1.7584
21-May-04
1.7880
6-May-04
1.7941
14-May-04
1.7572
24-May-04
1.7908
7-May-04
1.7842
17-May-04
1.7695
25-May-04...
Daily Spot Exchange Rate, U.S. Dollars per Pound Sterling Date Rate Date Rate Date Rate 1-Apr-04...
Daily Spot Exchange Rate, U.S. Dollars per Pound
Sterling
Date
Rate
Date
Rate
Date
Rate
1-Apr-04
1.8684
13-Apr-04
1.8260
23-Apr-04
1.7674
2-Apr-04
1.8373
14-Apr-04
1.7702
26-Apr-04
1.7857
5-Apr-04
1.8140
15-Apr-04
1.7785
27-Apr-04
1.7925
6-Apr-04
1.8674
16-Apr-04
1.8104
28-Apr-04
1.7720
7-Apr-04
1.8410
19-Apr-04
1.8155
29-Apr-04
1.7856
8-Apr-04
1.8525
20-Apr-04
1.7816
30-Apr-04
1.7844
9-Apr-04
1.8322
21-Apr-04
1.7620
3-May-04
1.7720
12-Apr-04
1.8558
22-Apr-04
1.7684
4-May-04
1.7507
5-May-04
1.7732
13-May-04
1.7554
21-May-04
1.7880
6-May-04
1.7641
14-May-04
1.7692
24-May-04
1.7808
7-May-04
1.7942
17-May-04
1.7595
25-May-04...
Suppose the pound/$ spot rate is (pound symbol) .7996, the 3-month forward rate is (pound symbol)...
Suppose the pound/$ spot rate is (pound symbol) .7996, the
3-month forward rate is (pound symbol) .7923, short-term interest
rates in the US and Britain are .025% and .0637% respectively, use
the theory of (un)covered interest rate parity to show why
investors may or may not decide to invest $2m in the US or UK. Is
the pound in a forward premium or discount? Why?
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