Reading 18: Currency Exchange Rates-LOS f 习题精选 interpret, contract, currency, foreign, forward

土豆妮

Session 4: Economics: Economics for Valuation
Reading 18: Currency Exchange Rates

LOS f: Calculate and interpret the spread on a forward foreign currency quotation and explain how spreads on forward foreign currency quotations can differ as a result of market conditions, bank/dealer positions, trading volume, and maturity/length of contract.

 

 

 

The three-month forward rate for the Byzantine solidus (BYZ) against the Venetian ducat (VEN) is quoted as 11.98 – 12.03 VEN/BYZ. The bid-ask spread on the direct quote to a Byzantine investor is closest to:

A) 0.0003 BYZ/VEN

B) 0.05 VEN/BYZ

C) 0.05 BYZ/VEN

土豆妮

The three-month forward rate for the Byzantine solidus (BYZ) against the Venetian ducat (VEN) is quoted as 11.98 – 12.03 VEN/BYZ. The bid-ask spread on the direct quote to a Byzantine investor is closest to:

A) 0.0003 BYZ/VEN

B) 0.05 VEN/BYZ

C) 0.05 BYZ/VEN

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The direct quote for a Byzantine investor is BYZ/VEN. The bid and ask quotes are 1 / 11.98 = 0.0834 BYZ/VEN and 1 / 12.03 = 0.0831 BYZ/VEN. The spread is 0.0834 ? 0.0831 = 0.0003 BYZ/VEN.

土豆妮

Assume that the USD/GBP six-month forward rate is quoted at a bid of 1.72546 and an ask of 1.72776. What is the spread on the indirect quote for a U.S. dealer?

A) 0.000772 USD/GBP.

B) 0.002300 USD/GBP.

C) 0.000772 GBP/USD.

土豆妮

Assume that the USD/GBP six-month forward rate is quoted at a bid of 1.72546 and an ask of 1.72776. What is the spread on the indirect quote for a U.S. dealer?

A) 0.000772 USD/GBP.

B) 0.002300 USD/GBP.

C) 0.000772 GBP/USD.

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For an indirect quote, the bid and ask prices must be converted to GBP/USD. This is accomplished by taking the reciprocal of each and then subtracting the bid from the ask price.

1 / 1.72546 USD/GBP = 0.579556 GBP/USD
1 / 1.72776 USD/GBP = 0.578784 GBP/USD

The spread is 0.578784 ? 0.579556 = 0.000772 GBP/USD

土豆妮

Which of the following statements best describes a six month forward foreign currency spread? The six month forward foreign currency spread:

A) is the same as the spot spread.

B) tends to be smaller than the spot spread.

C) tends to be larger than the spot spread.

土豆妮

Which of the following statements best describes a six month forward foreign currency spread? The six month forward foreign currency spread:

A) is the same as the spot spread.

B) tends to be smaller than the spot spread.

C) tends to be larger than the spot spread.

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The forward foreign currency spreads tend to be larger than the spot spreads.

土豆妮

An American wants to buy six cases of champagne. Each case costs 390 SEK. If the SEK/USD exchange rate is 6.90, what is the USD cost of the champagne?

A) USD2,340.00.

B) USD339.13.

C) USD56.52.

土豆妮

An American wants to buy six cases of champagne. Each case costs 390 SEK. If the SEK/USD exchange rate is 6.90, what is the USD cost of the champagne?

A) USD2,340.00.

B) USD339.13.

C) USD56.52.

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Total SEK cost = 390 × 6 = 2,340 SEK. Invert the quote = 1 / 6.9 = 0.1449 USD/SEK.
Total dollar cost = 0.1449 USD/SEK × 2,340 SEK = USD339.13

土豆妮

In an attempt to reduce her inventory, a dealer holding excess foreign currency should:

A) move the midpoint of her direct quote up.

B) move the midpoint of her direct quote down.

C) quote a narrower bid-ask spread.

土豆妮

In an attempt to reduce her inventory, a dealer holding excess foreign currency should:

A) move the midpoint of her direct quote up.

B) move the midpoint of her direct quote down.

C) quote a narrower bid-ask spread.

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To reduce inventory, a dealer holding excess foreign currency should move the midpoint of her direct quote down. If the dealer narrows the spread, her bid price would rise at a time when she does not want to buy.