1) The spot rate for the euro in New York is $0.8473

(a) What should the spot price for the USD be in Frankfurt?

(b) Should the Dollar be quoted at euro1.20/$ in Frankfurt, how

would the market react?.

2) When the euro spot rate was quoted at $0.8473 in New York, the

US market was quoting sterling at $1.32/pound.

(a) What should the price of the sterling pound be in New York?

(b) If sterling pound was quoted at euro 1.1189/pound in

Frankfurt, what profit opportunities would exist?

3) The spot rate for the French franc is $0.1600/FF and the threemonth

forward rate is $0.1605/FF. Your company is prepared to

speculate that the French franc will have $ 0.1750/FF by the end

of three-months. Assuming that your company has agreed to put $

1million at risk on the deal

(a) Are the quotations given in direct or indirect Paris quotations?

(b) How would the speculation be undertaken using the spot

market only?

(c) How would the speculation be undertaken using the forward

markets?

4) A foreign exchange trader gives the following quotes for the

Belgian francs spot, one-month, three month and six month to a

US based treasurer.

$0.02476/78 2/4 7/6 12/9

(a) Calculate the outright quotes for one, three and six months

forward.

(b) If the treasurer wishes to buy Belgian francs three month

forward, how much would the treasurer pay in Dollars?

(c) If the treasurer wishes to purchase USD one month forward,

how much would the treasurer have to pay in Belgian francs?

(d) Assuming that the Belgian francs are being bought, what is

the premium or discount for one, three and six month forward

rates in annual percentage terms?