Please see the Exhibit 5.7 on the Google Drive Link: https://docs.google.com/document/d/1yOnhJChWd79QzkOuqsgB3H1Te_3pHCHMRp9XSbTXYzU/edit?usp=sharing

QUESTION 9

Assume you are a trader with Deutsche Bank. From the quote screen on your computer terminal, you notice that Dresdner Bank is quoting EUR/USD at 1.2460 and Credit Suisse is offering USD/CHF at 0.8854. You learn that UBS is making a direct market between the Swiss franc and the euro, with a current EUR/CHF of 1.1043. (Ignore bid-ask spreads for this problem.)

Assume you have $5,000,000 with which to conduct the arbitrage. What is the profit or loss if you initially buy Euros with your USD? (answer in USD, no cents)

Ans: _____________________________

Using the quotes from Exhibit 5.7, calculate the one-month forward cross-exchange rate for CHF/JPY (XXX.XX)

QUESTION 2

Using the quotes from Exhibit 5.7, calculate the six-month forward cross-exchange rate for EUR/GBP (X.XXXX)

Ans: _________________

QUESTION 3

Using Exhibit 5.7, calculate the three-month forward premium or discount for the Euro versus the U.S. dollar. For simplicity, assume each month has 30 days. (X.XX%) or (-X.XX%)

Ans: ___________________

QUESTION 5

Using Exhibit 5.7, calculate the six-month forward premium or discount for the Swiss franc versus the U.S. dollar. For simplicity, assume each month has 30 days. (X.XX%) or (-X.XX%)

Ans: __________________

QUESTION 7

Using the quotes from Exhibit 5.7, calculate the six-month forward cross-exchange rate for EUR/CHF (X.XXXX)

Ans: ____________________________