5.3 and 5.4

1 month 30 2 months 60 3 months 90 6 months 180 12 months 360 1.3368 1.3376 1.3382 1.3406 1.3462 1.3230 1.3228 1.3224 1.3215 1.3194 5.3 Japanese Yen Forward. Use the following spot and forward bid-ask rates for the Japanese yen/U.S. dol- lar (/$) exchange rate from September 16, 2010, to answer the following questions: Period /$ Bid Rate spot 1 month 2 months /$ Ask Rate 85.46 85.05 84.90 85.41 85.02 84.86 84.37 83.17 82.87 84.42 83.20 3 months 6 months 12 months 24 months 82.91 81.79 81.82 a. What is the mid-rate for each maturity? b. What is the annual forward premium for all maturities? c. Which maturities have the smallest and largest forward premiums? 5.4 Andreas Broszio (Geneva). Andreas Broszio just started his job as an analyst for Credit Suisse in Geneva, Switzerland. He receives the following quotes for Swiss francs against the dollar for spot, 1 month forward, 3 months forward, and 6 months forward. 5. SF1.2575/$ SF1.2585/S Spot exchange rate: Bid rate Ask rate 1 month forward 3 months forward 6 months forward 10 to 15 14 to 22 20 to 30 a. Calculate outright quotes for bid and ask and the number of points spread between each. b. What do you notice about the spread as quotes evolve from spot toward 6 months? c. What is the 6-month Swiss bill rate