Forward exchange rates Select one: A)involve the exchange of bank deposits at a specified future date...

Forward exchange rates

Select one:

A)involve the exchange of bank deposits at a specified future date at a pre-established price
B)none

C) involve the immediate exchange of bank deposits at the current exchange rate (spot)
D)involve the immediate exchange of imports and exports

Expert Solution

Q: Forward exchange rates

ANSWER : (OPTION A) involve the exchange of bank deposits at a specified future date at a pre-established price

Because, forward exchange rate ia a rate negotiated today between a bank and a client upon entering into a forward contract agreeing to buy or sell some amount of foreign currency in the future. It is a contracted price for a transaction that will be completed at an agreed upon date in the future date at a predetermined price . It is forward-looking.

The other options are not correct because immediate exchage cannot be done through forward contract. it is always focus on future transactions and also a legal agreement to buy or sell a particular commodity asset, or security at a predetermined price at a specified time in the future

The forward rate, on the other hand, refers to the future exchange rate agreed upon in forward contracts.The forward exchange rate is the rate at which a commercial bank is willing to commit to exchange one currency for another at some specified future date.The forward exchange rate is a type of forward price.

jeff jeffy answered 2 years ago

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...

Which one of the following is not a forward commitment? Foreign exchange forward Foreign exchange futures...

Which one of the following is not a forward commitment? Foreign exchange forward Foreign exchange futures Foreign exchange options Foreign exchange swaps all above are forward commitment

Q 1 Explain the difference between spot exchange rates and forward exchange rates. Briefly explain how...

Q 1 Explain the difference between spot exchange rates and forward exchange rates. Briefly explain how the forward exchange market works.

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.

2) Forward exchange rates under no-arbitrage a) Find the five-year forward AUD/JPY exchange rate under no-arbitrage...

2) Forward exchange rates under no-arbitrage a) Find the five-year forward AUD/JPY exchange rate under no-arbitrage if the spot exchange rate is 80 yen per Australian dollar, and the five-year risk-free interest rates in Australia and Japan are 4% and 6% per annum, respectively. (1 point) b) Choose a forward exchange rate that is greater than the no-arbitrage exchange rate you found in (a), and describe the arbitrage strategy you would use to exploit this situation. Calculate your profits from...

1-If two countries choose to fix the exchange rates among their currencies, then Select one: A....

1-If two countries choose to fix the exchange rates among their currencies, then Select one: A. the country with a current account surplus can decrease its money supply to delay the need for intervention. B. the country with a lower rate of inflation will eventually have large current account surpluses. C. both countries will have an inflation rate of zero. D. there usually is more pressure on the government whose country has an overall payments surplus than on the government...

High discount rates are considered problematic because … Select one: a. they render future environmental values...

High discount rates are considered problematic because … Select one: a. they render future environmental values insignificant b. they result in an overestimation of future cost c. they undervalue the interests of future generations d. a and b e. a and c f. all of the above Choice modelling is preferred over contingent valuation because: Select one: a. it potentially reduces the incentive for respondents to behave strategically. b. it does not force respondents to consider trade-offs between attributes. c....

A foreign exchange trader working for a bank enters into a long position in a forward...

A foreign exchange trader working for a bank enters into a long position in a forward contract to buy one million pounds of sterling at an exchange rate of 1.6000 in three months. At the same time, another trader on the next desk takes a long position in 16 three month futures contracts on sterling. The futures price is 1.6000, and a futures contract is on £62,500. The forward and the futures prices both increase to 1.6040 at the end...

The IS/LM/BP analysis suggests that, under flexible exchange rates, Select one: a. monetary policy is less...

The IS/LM/BP analysis suggests that, under flexible exchange rates, Select one: a. monetary policy is less powerful for affecting national income than under fixed exchange rates. b. a country may have difficulty in staying on the LM curve. c. expansionary fiscal policy may, in theory, cause either depreciation or appreciation of the home currency. d. expansionary fiscal policy will always lead to a decline in national income.

A foreign exchange trader working for a bank enters into a long forward contract to buy...

A foreign exchange trader working for a bank enters into a long forward contract to buy one million pounds sterling at an exchange rate of 1.6000 in three months. At the same time, another trader on the next desk takes a long position in 16 three-month futures contracts on sterling. The futures price is 1.6000 and each contract is on 62,500 pounds. Within minutes of the trades being executed the forward and the futures prices both increase to 1.6040. Both...

Question