Questions Set 73:

Solution

  1. The Wall Street Journal reported the following spot and forward rates for the Swiss franc ($/SF) in june of 2009:

Spot……………………$0.8466
30-day forward………………$0.8504
90-day forward………………..$0.8540
180-day forward………………$0.8587

  • Was the Swiss franc selling at a discount or premium in the forward market?
  • What was the 30-day forward premium (or discount)?
  • What was the 90-day forward premium (or discount)?
  • Suppose you executed a 90-day forward contract to exchange 100,000 Swiss francs into U.S. dollars. How many dollars would you get 90 days hence?
  • Assume a Swiss bank entered into a 180-day forward contract with Citicorp to buy $100,000. How many francs will the swiss bank deliver in six months to get U.S. Dollars?
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