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problem1. Suppose that the current U.S. dollar-British spot rate is 0.63763. When the current nominal one-year interest rate in U.S. is 2% and the comparable rate in Britain is 4%, what is approximate forward exchange rate for the 360 days?

problem2. Suppose that one-year interest rates are currently 2.00% in United States and 4.00% in Great Britain. The current spot rate between the pound and dollar is a $1.5683. What is expected spot rate in one year when the international Fisher effect holds?

problem3. You purchased one 3-month British pound futures contract for $1.5200 only to see the dollar move to a value of $1.5700 at which time you sold out the pound futures. When each pound futures contract is for the amount of 62,500, how much money in USD did you gain or lose from your supposition in pound futures?

problem4. A call option on UK pounds has the strike price of $1.5800 and cost of $0.05. What is break-even spot exchange rate for the option?

Financial Accounting, Accounting

  • Category:- Financial Accounting
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