Ch 5 Homework international financeCh 5 Homework international financefile attach
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Ch.5 Homework
Fall 2019
Due: 10/15 in class
Using spot quotes from Exhibit 5.4, calculate a cross-rate matrix for the Argentine peso,
Brazillian Real, Chilean Peso, and Peruvian new sol.
Using quotes from Exhibit 5.4, calculate the one, three, and six month forward cross-exchange
rates between the Australian dollar and UK pound.
A foreign exchange trader with a U.S. bank took a long position of GBP 8,000,000 when the
USD/GBP exchange rate was 1.34. Since then, the rate has changed to 1.45. Is this movement
good from the point of view of the trader? By how much has the bank’s liability changed due to
the change in rate?
Using exhibit 5.4, calculate the one, three, and six month forward premium (or discounts) for
the USD vs. the GBP using European term quotations. For simplicity, assume each month has 30
days. What is the interpretation of your results?
A bank is quoting the following exchange rates against the USD for the British Pound and the
Canadian Dollar:
GBP/USD = .6945 – 55
CAD/USD = 1.2895 – 90
You specialize in cross-rate arbitrage. You notice the following quotes:
Swiss franc / U.S. dollar = CHF1.2345/$
Australian dollar/ U.S. dollar = AUD 1.6934/$
Australian dollar / Swiss franc = AUD1.3810/CHF
Ignoring transaction costs, do you have an arbitrage opportunity based on these quotes? If so,
list the steps you would take to exploit it. If you have $1,000,000 to exploit the arbitrage, how
much would you profit?
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