1.

Computation of the Bid Ask Spread

Bid/Ask Spread = (Ask Rate Bid Rate) / Ask Rate
Currency Bid Rate Ask Rate (Ask Rate
Bid Rate) /
Ask Rate
= Bid/Ask Per
Spread
GBP $ 1.52 $ 1.60 ($ 1.60 - $
1.52) / $ 1.60
= 0.05 or 5%
JPY $ 0.0070 $ 0.0074 ($ 0.0074 $
0.0070) / $
0.0074
= 0.054 or 5.4 %

Notes : Lebih kecil lebih liquid
2. Direct quotation, represents the value of a foreign currency in dollars, ex: $ 1.40 per Euro.
3. Indirect quotation, represents the number of units of a foreign currency per dollar, ex: 0.7143 per
dollar
Indirect quotation = 1 / Direct quotation
4. Cross exchange rate, ex:
Value of peso = $0.07
Value of Canadian dollar = $0.70
Value of peso in C$ = Value of peso in $/Value of C$ in $
= $0.07/$0.70
= C$ 0.10

5. Percent in foreign currency value = S-St-1/St-1, ex :
Value of C$ Monthly % change
in C$
Value of Euro Monthly % change
in Euro
Jan 1 $ .70 o $1.18 o
Feb 1 $ .71 +1.43% $1.16 -1.69%


6. Assume that Live Co. has expected cash flows of $100,000 from domestic operations, SF100,000 from
Swiss operations, and 75,000 euros from Italian operations at the end of the year. The Swiss franc's
value and euro's value are expected to be $0.83 and $1.29 respectively, at the end this year. What are
the expected dollar cash flows of Live Co?
= $ 100,000 + $ (100,000 * 0.83) + $ (75,000 * 1.29)
= $ 100,000 + $ 83,000 + $ 96,750
= $ 279.750
7. Baylor Bank believes the New Zealand dollar will appreciate over the next five days from $.48 to $.50.
The following annual interest rates apply: (APPRECIATE)

Currency Lending Rate Borrowing Rate
Dollars 7.10% 7.50%
New Zealand dollar (NZ$) 6.80% 7.25%

Baylor Bank has the capacity to borrow either NZ$10 million or $5 million. If Baylor Bank's forecast is
correct, what will its dollar profit be from speculation over the five-day period (assuming it does not use
any of its existing consumer deposits to capitalize on its expectations)?

o Borrow $5 million.

o Convert to NZ$: $5,000,000/$0.48 = NZ$10,416,667.

o Invest the NZ$ at an annualized rate of 6.80% over five days.

NZ$10,416,667 x [1 + 6.80% (5/360)]

= NZ$10,426,505

o Convert the NZ$ back to dollars:

NZ$10,426,505 x $.50 = $5,213,252

o Repay the dollars borrowed. The repayment amount is:

$5,000,000 x [1 + 7.5% (5/360)]

= $5,000,000 x [1.00104]

= $5,005,208

o After repaying the loan, the remaining dollar profit is:

$5,213,252 - $5,005,208 = $208,044
8. Assume the following information regarding U.S. and European annualized interest rates:
(DEPRECIATE)

Currency Lending Rate Borrowing Rate
U.S. Dollar ($) 6.73% 7.20%
Euro () 6.80% 7.28%

Trensor Bank can borrow either $20 million or 20 million. The current spot rate of the euro is $1.13.
Furthermore, Trensor Bank expects the spot rate of the euro to be $1.10 in 90 days. What is Trensor
Bank's dollar profit from speculating if the spot rate of the euro is indeed $1.10 in 90 days?
Borrow 20 million.

Convert the 20 million to 20,000,000 x $1.13 = $22,600,000.

Invest the $22,600,000 at an annualized rate of 6.73% for 90 days.

$22,600,000 x [1 + 6.73% (90/360)]

= $22,980,245

Determine euros owed: 20,000,000 x [1 + 7.28% (90/360)] = 20,364,000.

Determine dollars needed to repay euro loan: 20,364,000 x $1.10 = $22,400,400.

The dollar profit is $22,980,245 - $22,400,400 = $579,845.
9. The one-year forward rate of the British pound is quoted at $1.62, and the spot rate of the British pound
is quoted at $1.65. The forward ____ is ____ percent.
(F/S) 1 = ($1.62/$1.65) 1 = 1.8 percent. (klo minus discount)
10. The 90-day forward rate for the euro is $1.05, while the current spot rate of the euro is $1.07. What is
the annualized forward premium or discount of the euro?
[(F/S) 1] x 360/90 = 7.5 percent.
11. The 180-day forward rate for the euro is $1.34, while the current spot rate of the euro is $1.29. What is
the annualized forward premium or discount of the euro?
[(F/S) 1] x 360/180 = [($1.34/$1.29) 1] x 360/180 = 7.75%
12. You purchase a call option on pounds for a premium of $0.04 per unit, with an exercise price of $1.64;
the option will not be exercised until the expiration date, if at all. If the spot rate on the expiration date is
$1.65, your net profit per unit is:
Net profit per unit = $1.65 $1.64 $0.04 = $0.03.
13. Your company will receive AUD600,000 in 90 days. The 90-day forward rate in the Australian dollar is
$0.75. If you use a forward hedge, you will:
AUD600,000 x $0.75 = $450,000
Assume the following information:

U.S. deposit rate for 1 year = 11%
U.S. borrowing rate for 1 year = 12%
Swiss deposit rate for 1 year = 8%
Swiss borrowing rate for 1 year = 10%
Swiss forward rate for 1 year = $0.40
Swiss franc spot rate = $0.39

Also assume that a U.S. exporter denominates its Swiss exports in Swiss francs and expects to receive
SF600,000 in 1 year.

Using the information above, what will be the approximate value of these exports in 1 year in U.S.
dollars given that the firm executes a forward hedge?
SF600,000 x $.40 = $240,000

14. Assume the following information:

U.S. deposit rate for 1 year = 11%
U.S. borrowing rate for 1 year = 12%
New Zealand deposit rate for 1 year = 8%
New Zealand borrowing rate for 1 year = 10%
New Zealand dollar forward rate for 1 year = $0.40
New Zealand dollar spot rate = $0.39

Also assume that a U.S. exporter denominates its New Zealand exports in NZ$ and expects to receive
NZ$600,000 in 1 year. You are a consultant for this firm.

Using the information above, what will be the approximate value of these exports in 1 year in U.S.
dollars given that the firm executes a money market hedge?
Borrow NZ$545,455 (NZ$600,000/1.1) = NZ$545,455.-> 1.1 dari 1+0.1 (10% borrow rate NZD)

Convert NZ$545,455 to $212,727 (at $.39 per NZ$).

Invest $212,727 to accumulate $236,127 ($212,727 x 1.11) = $236,127. -> 1.11 dari 1+0.11
(11% deposit rate USD)


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Klo AR cari pilihan yang return paling besar
Klo AP cari pilihan yang return paling kecil