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发表于 2010-4-26 13:43 | 只看该作者

Reading 68: Forward Markets and Contracts LOSh习题精选

2010, currency, exchange, received, company

LOS h: Describe the characteristics of currency forward contracts.

Macklin Metals has received 80 million pounds sterling. The company plans to spend $120 million on a project in the United States in 90 days. Macklin inters into a cash settlement currency forward to exchange the pounds for U.S. dollars at a rate of $1.50 per pound in 90 days. If the exchange rate is $1.61 per pound at the settlement date, the cash settlement Macklin will pay or receive is closest to:

A)
 $8.8 million receipt.
B)
 $5.5 million payment.
C)
 $8.8 million payment.


 

Under the contract, Macklin receives:
80 million pounds × $1.50 = $120.0 million
At market rates, Macklin would receive:
80 million pounds × $1.61 = $128.8 million
Macklin must pay the difference, $8.8 million ($128.8 million ? $120 million), as the cash settlement to the counterparty.

 

 

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honeycfa

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2#
发表于 2010-4-26 13:43 | 只看该作者

Macklin Metals has received 80 million pounds sterling. The company plans to spend $120 million on a project in the United States in 90 days. Macklin inters into a cash settlement currency forward to exchange the pounds for U.S. dollars at a rate of $1.50 per pound in 90 days. If the exchange rate is $1.61 per pound at the settlement date, the cash settlement Macklin will pay or receive is closest to:

A)
 $8.8 million receipt.
B)
 $5.5 million payment.
C)
 $8.8 million payment.


Under the contract, Macklin receives:
80 million pounds × $1.50 = $120.0 million
At market rates, Macklin would receive:
80 million pounds × $1.61 = $128.8 million
Macklin must pay the difference, $8.8 million ($128.8 million ? $120 million), as the cash settlement to the counterparty.

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honeycfa

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发表于 2010-4-26 13:44 | 只看该作者

An agreement that requires the parties to exchange a certain amount of Yen for a certain amount of Euros on a specific date in the future is called a(n):

A)
 exchange rate agreement.
B)
 foreign exchange future.
C)
 currency forward contract.


Such an agreement is called a currency forward contract.

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honeycfa

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发表于 2010-4-26 13:44 | 只看该作者

A currency forward contract:

A)
 requires a payment at settlement based on London Interbank Offered Rate.
B)
 can be a deliverable contract.
C)
 is priced using the future interest rate on a foreign currency.


A currency forward contract can be a deliverable or cash-settlement contract. It is a contract to exchange fixed amounts of two currencies at settlement and its value depends on market exchange rates at contract expiration.

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