Question
Do all parts please. I will give you a great rating. Do all Parts ASAP. Thank you so much. Part 1a. A client is looking
Do all parts please. I will give you a great rating. Do all Parts ASAP. Thank you so much.
Part 1a.
A client is looking to buy forward CHF $60 million with USD on January 7, 2021. Calculate the USD/CHF forward rate given the following data.
Dates | Day Count | |
Transaction Date | June 5, 2020 | N/A |
Spot Value Date | June 7, 2020 | N/A |
Forward Value Date | January 7, 2021 | 214 |
6 Months Forward | December 6, 2020 | 182 |
12 Months Forward | June 7, 2021 | 365 |
| Rates |
USD/CHF Spot | 0.9837-47 |
6-Month Forward Points | 78.00-88.00 |
12-Month Forward Points | 132.10-148.10 |
0.9924
0.9936
0.9927
0.9919
Part 1b.
A client is looking to buy forward CHF $60 million with USD on January 7, 2021. Calculate the USD/CHF forward rate given the following data.
Dates | Day Count | |
Transaction Date | June 5, 2020 | N/A |
Spot Value Date | June 7, 2020 | N/A |
Forward Value Date | January 7, 2021 | 214 |
6 Months Forward | December 6, 2020 | 182 |
12 Months Forward | June 7, 2021 | 365 |
| Rates |
USD/CHF Spot | 0.9837-47 |
6-Month Forward Points | 78.00-88.00 |
12-Month Forward Points | 132.10-148.10 |
0.9924
0.9936
0.9927
0.9919
Part 1c.
A European client that was due to paying JPY 20 million held a forward contract to hedge a JPY 20 million contract, which has been delayed by one year. The client decided to enter into an FX swap to roll forward the position.
The EUR/JPY rate on the original FX forward expiry date was 119.30. The forward rate in one year is 119.10. The interest rate in Europe is 0.50% while the interest rate in Japan is 0.25%. Calculate the total benefit or cost of this FX swap.
- 138.30
- 137.59
138.30
137.59
Part 1d.
An FX swap involving interest payments at different floating rates is called:
Cross-currency basis swap
Cross-currency interest rate swap
Cross-currency
Cross-currency floating swap
Part 2a.
Which of the following statement about carry trades is NOT true?
Review Later
When the funding currency strengthens versus the carry currency, the investors realize profits from the carry trade.
Carry trades involve currency pairs that have a large interest rate differential.
Investors can benefit from a carry trade by borrowing in currency with lower interest rates, converting this amount into another currency with higher rates of return and investing.
The lower yielding currency in a carry trade is called the funding currency while the higher yielding currency is the carry currency.
Part 2b.
If one is long a European put option, when the spot price of the underlying asset is below than the strike price of the underlying asset the option is said to be:
At-the-money
In-the-money
Out-of-the-money
Below-the-money
Part 2c.
Investor A is currently in a short call position with a strike price of $36. The option premium for the option is $2.5. At expiration, the underlying asset price rises to $41. What is the investors net profit or loss?
$2.5
- $5
$0
- $2.5
Part 2d.
All the following FX products would be appropriate for hedging a transaction when the required future cash flows are certain EXCEPT:
Cross-currency FX swaps
FX options
FX swaps
FX forwards
Part 3a.
Client C based in Europe entered into a put option contract to hedge a contract of USD $2.15MM due in six months. Suppose six months later, EUR/USD drops to 1.0680. Using the provided information, determine whether the party should exercise the option and calculate the total cost.
EUR/USD spot rate today | 1.0750 |
Cost of EUR/USD FX option contract | 50,000 |
6-Month OTM put option (strike @ 1.0700) | 0.0080 |
Do not exercise the option; total cost = 2,029,109
Exercise the option; total cost = 2,009,346
Exercise the option; total cost = 2,025,346
Do not exercise the option; total cost = 2,013,109
Part 3b.
Match the descriptions to the appropriate terminology for non-deliverable forwards (NDFs).
Notional Amount
Fixing Date
Settle Date
Contracted NDF Rate
- Face value of the NDF in the non-deliverable currency
- The forward FX rate agreed upon the transaction date
- The date where the NDF rate will be compared with the spot rate
- The date when the difference between the spot rate and NDF rate is paid out in cash
Part 4.
Which of the following currencies is not included in the basket of currencies which the value of the special drawing rights (SDRs) is based on?
CNY
JPY
EUR
CHF
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