Question
a. You are given the following quotes. Current Spot Exchange Rate USD/ZAR 17,000-17,500 Interest rates (percent per year): USD 3.0% -3.5% ZAR 2.0% -
a. You are given the following quotes. Current Spot Exchange Rate USD/ZAR 17,000-17,500 Interest rates (percent per year): USD 3.0% -3.5% ZAR 2.0% - 2.5% Calculate the USD/ZAR 1-year forward bid and ask exchange rate? Assume that the USD is the Domestic Currency b. What is the percentage bid-ask spread in the rates calculated in (a)? (7 Marks) (2 Marks) c. What are the factors that would determine the size of the Bid-Ask spread calculated in (a) above? Simply and explain list these factors (2 marks each). (10 Marks)
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Global Investments
Authors: Bruno Solnik, Dennis McLeavey
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321527704, 978-0321527707
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