6) Suppose the following exchange rate bid and offer (ask) quotes exist for the following

currencies

Currency Bid Offer

CAD/USD 1.1905 1.1925

1 month forward 1.2005 1.2019

3 month forward 1.2109 1.2125

6 month forward 1.2215 1.2235

USD/EUR 1.3029 1.3042

USD/GBP 1.8562 1.8685

1 month forward 1.8435 1.8454

3 month forward 1.8332 1.8358

6 month forward 1.8285 1.8296

JPY/USD 105.75 105.98

(JPY = Japanese Yen; EUR = Euros; USD = US dollar; CAD = Canadian dollar;

CAD = Canadian Dollar, GDP = British Pound)

a) Is the USD selling at a forward discount or premium against the GBP and what is

the 3 month forward premium/discount?

b) Your firm is buying a production facility in Canada that is going to cost your firm

CAD 15 million. How many dollars does this cost you?

c) You are a firm in Japan that just received CAD 1 million from a sale of computer

chips in Canada. How many Yen will you receive if you have to go through the

dollar to convert the CAD to Yen?

d) Your US computer firm subcontracts out some of its computer programming to a

firm in Europe. You agreed to pay $300,000 for some work. How many Euros

will the European firm receive?

e) You represent a British firm bidding to buy office furniture from a manufacturer

in North Carolina. The North Carolina firm wants the bids in USD and expects

payment in 3 months from now. Normally, you would be willing to bid GBP

500,000 for the furniture. What bid would you submit to the firm in North

Carolina?

f) Youre working for a Canadian manufacturer who just agreed to sell 50,000

assembled engines to an automobile manufacturer in the US. Payment will be

made in 6 months and you agreed to sell your engines at a cost of $1500 each.

i) How many CAD will you receive at todays spot rate?

ii) How many CAD will you receive if the CAD depreciates by 10% over the

next 90 days (and you waited to convert your USD to CAD until then)?

iii) How many CAD will you receive if you entered into a forward contract?

iv) How many CAD will you receive if the CAD depreciated by 10% (and youve

entered into the forward contract)?

v) Would you be happy or sad if you entered into a forward contract to buy

CAD and the CAD depreciated from the time that you entered into the

forward contract until the execution date? Explain.