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Consider the following quotes on the Israeli New Shekel (ILS) and the U.S. Dollar (USD): Spot exchange rate 3-months 6-months 9-months ILS3.05-3.13/USD ILS3.19-3.20/USD ILS3.31-3.45/USD ILS3.61-3.89/USD
- Consider the following quotes on the Israeli New Shekel (ILS) and the U.S. Dollar (USD):
| Spot exchange rate | 3-months | 6-months | 9-months |
| ILS3.05-3.13/USD | ILS3.19-3.20/USD | ILS3.31-3.45/USD | ILS3.61-3.89/USD |
- Suppose that you are a U.S.-based trader and would like to enter a forward-forward forex swap into Israeli New Shekel worth USD1,000,000 in three months time for six months. Calculate and explain the cash flows associated with this swap transaction.
- Is the U.S. Dollar trading at a forward premium or discount? Justify your answer clearly.
- Explain and distinguish between transaction exposure and translation exposure from foreign currency fluctuations by providing an example of each.
- Suppose that the foreign currency interest rate is higher than the domestic currency interest rate. What is the relationship between spot and forward exchange rates according to interest rate parity?
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Finance Society And Sustainability
Authors: Nick Silver
1st Edition
1137560606, 978-1137560605
