Hello!

Can you please help me out with the calculations on this question? I have the answers but I can't understand the calculations behind those answers!

With best regards

Waleed

06 . Suppose you are quoted the following DEM / FC spot and forward rates : Spot 3 - mo . forward p. a . 3 month 6 - mo . forward P. 2 . 6 - month bid- ask bid-ask Euro - interest bid- ask Euro - interest DEM 5. 65 - 5. 90 5. 47 - 5.82 USD 0 . 5791 - 0. 5835\\ 0 . 5821 - 0. 5867 3.63 - 3.88 0 . 5839 - 0. 5895 3. 94 - 4.19 ECU 0 . 5 120 - 0. 5159 0 . 5103 - 0. 5142 6. 08- 6.33 0 . 5101 - 0. 5 146 5. 60- 6.25 FFR 3. 3890 - 3. 4150 3.3350 - 3.4410 6. 05 - 6.30 3. 3720 - 3.4110 5. 93 - 6.18 JPY *\\ 0. 5973 - 0.6033 0. 5987 - 0. 5025 1. 71 - 1.96 0 . 5023 - 0. 5099 2.47 - 2.75 GBP 0 . 3924 - 0. 395 4 0. 3933 - 0. 3989 5.09 - 5. 34 0 . 3929 - 0. 3001 5. 10 - 5.35 * The DEMIJPY exchange rate is for 100 JPY . ( a ) What are the three - month synthetic - forward DEMNUSD bid- ask rates ? ( b ) What are the six - month synthetic - forward DENVECU bid- ask rates ? ( C ) What are the six - month synthetic - forward DEM / FER bid- ask rates ? ( d ) What are the three - month synthetic - forward DEM / JPY bid- ask rates ? ( e ) In ( a ) - ( d) , are there any arbitrage opportunities ? Are there opportunities for least - cost dealing at the synthetic rate ?" A 6 . ( a ) 0. 5816 - 0. 5868; ( b) 0. 51 17 - 0. 5148; ( C ) 3. 381 - 3.409; ( d ) 0. 6028 - 0. 6096 . ( e ) DEM/USD : no arbitrage opportunity ; DEM/ECU: least cost dealing opportunity for sellers of ECU ; DEM /FFR : least- cost dealing opportunity for both buyers and sellers of FER ; DEMI JPY : arbitrage opportunity