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.

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

jeff jeffy answered 3 years ago

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