Question
In: Finance
8. The following data are taken from the financial market pages of an Australian newspaper. Forward...
8. The following data are taken from the financial market pages of an Australian newspaper.
Forward Margins
| Forward Contract | Forward Margins (Buy A$/Sell A$) |
| 1 month | 0/1 |
| 2 months | 1/2 |
| 3 months | 1/3 |
| 6 months | 2/4 |
| 1 year | 0/1 |
| 2 years | -16/-8 |
| 3 years | -51/-11 |
A) What do the forward rates indicate in terms of whether the A$ is expected to strengthen or weaken with respect to the US dollar?
Solutions
Expert Solution
Since the forward margin is given in ascending order it indicates that the foreign currency is at premium i.e. the forward or expected future price for a currency is greater than the spot price. It indicates that the current domestic exchange rate is going to increase against the other currency. i.e. AS is expected to strengthen with respect to USD
jeff jeffy answered 2 years agoRelated Solutions
7. The following data are taken from the financial market pages of an Australian newspaper. Forward...
7. The following data are taken from the financial market pages
of an Australian newspaper.
Forward Margins
Forward Contract
Forward Margins (Buy A$/Sell A$)
1 month
0/1
2 month
1/2
3 month
1/3
6 month
2/4
1 year
0/1
2 years
-16/-8
3 years
-51/-11
The data under the “Forward Margins” column represent the
forward contracts for the US dollar with respect to the Australian
dollar (given in points form).
(a) Using this data, and the bid-ask for spot USD...
2. The following data are taken from the financial market pages of an Australian newspaper. Forward...
2. The following data are taken from the financial market pages
of an Australian newspaper.
Forward Margins
Forward Contract
Forward Margins (Buy A$/Sell A$)
1 month
0/1
2 month
1/2
3 month
1/3
6 month
2/4
1 Year
0/1
2 Years
-16/-8
3 Years
-51/-11
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forward contracts for the US dollar with respect to the Australian
dollar (given in points form).
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