Question

In: Finance

4. Suppose the rate of appreciation of the dollar relative to the yen over the next...

4. Suppose the rate of appreciation of the dollar relative to the yen over the next 90 days is normally distributed with mean of -1% and a standard deviation of 3%. Use a spreadsheet program to graph the distribution of the future yen–dollar exchange rate. If the current spot exchange rate is ¥99 /$, and the 90-day forward rate is ¥98.30/$,describe the distribution of yen profits or losses from selling $5,000,000 forward.

Solutions

Expert Solution

Below is the normal curve with mean -1% and Standard Deviation 3%

Mean
-4 -0.1300000 0.0044610
-3.75 -0.1225000 0.0117532
-3.5 -0.1150000 0.0290894
-3.25 -0.1075000 0.0676349
-3 -0.1000000 0.1477283
-2.75 -0.09250 0.30311875
-2.5 -0.08500 0.58427668
-2.25 -0.07750 1.05798839
-2 -0.07000 1.79969888
-1.75 -0.06250 2.87591063
-1.5 -0.05500 4.31725319
-1.25 -0.04750 6.08830285
-1 -0.04000 8.06569082
-0.75 -0.03250 10.03791441
-0.5 -0.02500 11.73551089
-0.25 -0.01750 12.88893723
0 -0.01000 13.29807601
0.25 -0.00250 12.88893723
0.5 0.00500 11.73551089
0.75 0.01250 10.03791441
1 0.02000 8.06569082
1.25 0.02750 6.08830285
1.5 0.03500 4.31725319
1.75 0.04250 2.87591063
2 0.05000 1.79969888
2.25 0.05750 1.05798839
2.5 0.06500 0.58427668
2.75 0.07250 0.30311875
3 0.08000 0.14772828
3.25 0.08750 0.06763494
3.5 0.09500 0.02908942
3.75 0.10250 0.01175319
4 0.11000 0.00446101


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