Bid/Ask on Dollar/Euro Forwards. Use the following spot and forward bid-ask rates for the U.S. dollar/euro

(US$/)

from December 10, 2010, to answer the following questions:

a. What is the mid-rate for each maturity?

b. What is the annual forward premium for all maturities?

(Click on the

icon to import the table into a spreadsheet.)

Period	Bid Rate	Ask Rate
spot	1.3211	1.3212
1 month	1.3209	1.3210
2 months	1.3207	1.3208
3 months	1.3204	1.3206
6 months	1.3196	1.3198
12 months	1.3175	1.3180
24 months	1.3130	1.3162

Question content area bottom

Part 1

a. What is the mid-rate for each maturity?

Calculate the mid-rate for each maturity below:(Round to five decimal places.)

	Days	Bid Rate	Ask Rate	Mid-rate
Period	Forward	US$/	US$/	US$/
Spot	0	1.3211	1.3212	1.32115

Part 2

1 month

30

1.3209

1.3210

1.32095

Part 3

2 months

60

1.3207

1.3208

1.32075

Part 4

3 months

90

1.3204

1.3206

1.32050

Part 5

6 months

180

1.3196

1.3198

1.31970

Part 6

12 months

360

1.3175

1.3180

1.31775

Part 7

24 months

720

1.3130

1.3162

1.31460

Part 8

b. What is the annual forward premium for all maturities?

Calculate the annual forward premium for all maturities below:(Round to four decimal places.)

	Days	Bid Rate	Ask Rate	Forward
Period	Forward	US$/	US$/	Premium
Spot	0	1.3211	1.3212
1 month	30	1.3209	1.3210	-0.1817	%

Part 9

2 months

60

1.3207

1.3208

-0.1817

%

Part 10

3 months

90

1.3204

1.3206

-0.1969

%

Part 11

6 months

180

1.3196

1.3198

-0.2197

%

Part 12

12 months

360

1.3175

1.3180

-0.2574

%

Part 13

24 months

720

1.3130

1.3162

%