Question
Credit Suisse Geneva. Andreas Broszio just started as an analyst for Credit Suisse in Geneva, Switzerland. He receives the following quotes for Swiss francs against
Credit Suisse Geneva. Andreas Broszio just started 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. (Note: I am only trying to figure out how to find the Implied SF interest rate, Its 3 decimals and please show work so I can understand. Thank you.) Its the last part.
Spot exchange rate: | ||
Bid rate | SF1.26061.2606/$ | |
Ask rate | SF1.26141.2614/$ | |
1-month forward | 1010 to 1515 | |
3-months forward | 1414 to 2222 | |
6-months forward | 2020 to 3030 |
The current one-year U.S. T-Bill rate is
4.2 %4.2%.
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?
a. Calculate outright quotes for bid and ask and the number of points spread between each.
Calculate the outright quotes for bid and ask and the number of points spread between each below:(Round to four decimal places.)
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| Bid | Ask | Spread |
One-month forward (SF/$) | 1.2616 | 1.2629 | 0.0013 |
Save Accounting Table... | + | |||
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3-months forward (SF/$) | 1.2620 | 1.2636 | 0.0016 |
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6-months forward (SF/$) | 1.2626 | 1.2644 | 0.0018 |
b. What do you notice about the spread as quotes evolve from spot toward 6 months?(Select from the drop-down menus.)
It
narrowswidens
, most likely a result of
thinnerlarger
and
largerthinner
trading volume.
c. What is the 6-month Swiss bill rate?
Calculate the 6-month Swiss bill rate below:(Round the spot and forward exchange rate to four decimal places and the implied SF interest rate to three decimal places.)
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6-month Swiss bill rate |
|
|
Spot rate, midrate (SF/$) | 1.2610 |
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Copy to Clipboard... | + |
Six-month forward rate, midrate (SF/$) | 1.2635 |
Save Accounting Table... | + | |||
Copy to Clipboard... | + |
Maturity (days) | 180 | |
Six-month U.S. dollar treasury rate (yield) | 4.200 | % |
Implied SF interest rate |
| % |
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