DO PART B AND C ONLY

PART B INCLUDE FROM MONTH ONE TO MONTH 24

B

Japanese Yen Forward. Use the following spot and forward bid-ask rates for the Japanese yen/U.S. dollar (/$) exchange rate from September 16, 2010, to answer the following questions: a. What is the mid-rate quote for each maturity? b. What is the annual forward premium on the yen for all maturities? (Assume that the U.S. dollar is the home currency. Also use the Mid-Rate values computed in part a.) c. Which maturities have the smallest and largest forward premiums? (Click on the icon to import the table into a spreadsheet.) Period /$ Bid Rate /$ Ask Rate spot 82.61 1 month 82.19 2 months 82.03 3 months 81.57 6 months 80.40 12 months 80.09 C 2 months 60 82.03 82.06 82.045 3 months 90 81.57 81.61 81.590 6 months 180 80.40 80.44 80.420 12 months 360 80.09 80.12 80.105 24 months 720 78.98 79.01 78.995 b. What is the annual forward premium on the yen for all maturities? (Assume that the U.S. dollar is the home currency.) Calculate the annual forward premium for all maturities below. Use the Mid-Rate values computed in part a.. (Round to three decimal places.) Bid Rate Forward Days Forward Ask Rate \/$ Period \/$ Premium Spot 1 month 0 30 82.64 82.23 82.06 81.61 80.44 80.12 82.61 82.19 82.64 82.23 -4.00 % Period Spot 1 month 2 months 3 months 6 months 12 months 24 months