Please use the quotes from the WSJ of September 3, 20XX appended herewith: The quotes given are for Tuesday, 9/2 and Wednesday, 9/3 in answering problems 1 and 2. The WSJ quotes are appended at the end of this problem set.
3. The Ask price of the Mexican Peso is US $ 0.05489 per Peso and the Bid Price is $ 0.05372 per Peso. a. What is the Bid-Ask % Spread? b. If you have $1,000 how many Mexican Pesos you will get? (You are buying Pesos here) c. If you have 1000 Pesos, how many US dollars you will receive? (You are selling Pesos here)
a. What is the Bid-Ask % Spread?
b. If you have $1,000 how many Mexican Pesos you will get? (You are buying Pesos here)
c. If you have 1000 Pesos, how many US dollars you will receive? (You are selling Pesos here)
- Intel Corporation has Euros 100 million payables that need to be paid in 90-days. The current spot exchange rate is $1.1605/Euro. The 90-day forward rate is $1.1821/Euro. If Intel wants to hedge its payables in Euro 100 million, suggest a suitable hedging strategy using the forward contract and compute the total cost with the forward rate? If 90-days later the spot rate turned out to be $1.2525/Euro, compute any advantage/disadvantage to hedging using the forward contract.
5. A. Gulf Widget Inc. bought Euro Futures call option for a strike price of $1.35 for March, 2017 paying 2.50 cents per unit. When they exercised the option, the spot price was $ 1.5875. There are 125,000 units per Euro Futures option.
i. What is the break-even point for this option?
ii. Compute the total net profit/loss. What is the rate of return?
B. ABC corp. bought SF currency put futures option for April 2017, for a strike price of
$0.9500 per SF. They paid a premium of 3 cents per unit. At the time when ABC Corporation exercised the put, the spot price was $ 0.9015 per SF. There are 125,000 units in a SF currency futures option.
i. What is the break-even point for this option?
ii. Is it worthwhile exercising this option? Compute the total net profit/loss and the rate of return.
U.S.-dollar foreign-exchange rates in late New York trading IN US$ Country/currency Wed Tues US$ VS. % CHG 1-Day YTD PER US$ Wed Tues Americas Argentina peso Brazil real Canada dollar Chile peso Colombia peso Ecuador US dollar Mexico peso Peru new sol Uruguay peso Venezuela b. fuerte 0.1188 0.4475 0.9185 0.001698 0.0005172 1 0.0763 0.3510 0.04187 0.15748031 0.1190 0.4462 0.9150 0.001697 0.0005178 1 0.0763 0.3504 0.04202 0.15748031 0.18 -0.27 -0.39 -0.09 0.13 unch -0.08 -0.16 0.37 unch 29.1 -5.4 2.5 12.0 0.2 unch 0.4 1.6 12.7 ynch 8.4155 2.2348 1.0887 588.76 1933.65 1 13.0984 2.8491 23.8850 6.3500 8.4006 2.2409 1.0929 589.30 1931.20 1 13.1085 2.8538 23.7960 6.3500 Asia-Pacific Australian dollar 1-mos forward 3-mos forward 6-mos forward -4.6 -4.8 -4.8 -4.8 1.4 unch, China yuan -2.4 Hong Kong dollar India rupee Indonesia rupiah Japan yen 1-mos forward 3-mos forward 6-mos forward Malaysia ringgit New Zealand dollar Pakistan rupee Philippines peso Singapore dollar South Korea won Taiwan dollar Thailand baht Vietnam ng 0.9346 0.9326 0.9287 0.9229 0.1628 0.1290 0.01656 0.0000849 0.00954 0.00954 0.00955 0.00956 0.3145 0.8327 0.00978 0.0229 0.7991 0.0009812 0.03335 0.03122 0.00005 0.9276 0.9255 0.9217 0.9160 0.1627 0.1290 0.01650 0.0000851 0.00952 0.00952 0.00952 0.00953 0.3148 0.8316 0.00978 0.0230 0.7978 0.0009822 0.03336 0.03113 0.00005 -0.76 -0.77 -0.76 -0.75 -0.11 unch -0.36 0.20 -0.28 -0.29 -0.29 -0.29 0.10 -0.13 unch 0.14 -0.16 0.10 unch -0.30 0.13 -3.2 -0.5 -0.5 -0.5 -0.5 -3.1 -1.3 -3.0 -1.7 -0.9 -3.5 0.2 -2.1 0.4 1.0699 1.0723 1.0767 1.0835 6.1410 7.7502 60.39995 11777 104.80 104.77 104.73 104.62 3.1798 1.2009 102.200 43.620 1.2515 1019.16 29.983 32.031 21224 1.0781 1.0805 1.0850 1.0917 6.1480 7.7502 60.61995 11753 105.09 105.07 105.03 104.93 3.1766 1.2025 102.235 43.560 1.2535 1018.13 29.975 32.128 21196 Europe Czech Rep. koruna Denmark krone Euro area euro Hungary forint Norway Krone Poland zloty Romania leu Russia ruble Sweden krona Switzerland franc 1-mos forward 3-mos forward 6-mos forward Turkey lira UK pound 1-mos forward 3-mos forward 6-mos forward 0.04750 0.1766 1.3150 0.00418885 0.1608 0.3134 0.2989 0.02716 0.1428 1.0897 1.0900 1.0907 1.0919 0.4635 1.6461 1.6458 1.6449 1.6432 0.04734 0.1763 1.3134 0.00416204 0.1616 0.3119 0.2977 0.02670 0.1425 1.0881 1.0884 1.0891 1.0904 0.4603 1.6469 1.6465 1.6457 1.6440 -0.34 -0.12 -0.12 -0.64 0.49 -0.47 -0.39 -1.70 -0.18 -0.15 -0.14 -0.14 -0.14 -0.71 unch 0.05 0.05 0.05 5.9 4.3 4.5 10.4 2.4 5.5 2.8 11.8 8.8 2.8 2.7 2.7 2.7 0.4 0.6 21.054 5.6635 0.7605 238.73 6.2177 3.1906 3.3459 36.814 7.0032 0.9177 0.9175 0.9169 0.9158 2.1573 0.6075 0.6076 0.6079 0.6086 21.124 5.6706 0.7614 240.27 6.1874 3.2057 3.3588 37.451 7.0156 0.9190 0.9188 0.9182 0.9171 2.1726 0.6072 0.6073 0.6077 0.6083 0.6 0.6 0.6 Middle East/Africa Bahrain dinar Egypt pound Israel shekel Jordan dinar Kenya shilling Kuwait dinar Lebanon pound Saudi Arabia riyal South Africa rand UAE dirham Source: ICAP plc 2.6522 0.1399 0.2795 1.4115 0.01127 3.5102 0.0006610 0.2666 0.0936 0.2722 2.6532 0.1398 0.2797 1.4115 0.01130 3.5078 0.0006609 0.2666 0.0931 0.2722 unch unch 0.09 unch 0.23 -0.07 unch unch -0.51 unch unch 2.8 3.2 0.1 2.6 0.9 0.5 yach 1.9 unch 0.3771 7.1504 3.5784 0.7085 88.699 0.2849 1512.75 3.7504 10.6861 3.6732 0.3769 7.1507 3.5750 0.7085 88.495 0.2851 1513.05 3.7506 10.7407 3.6732 U.S.-dollar foreign-exchange rates in late New York trading IN US$ Country/currency Wed Tues US$ VS. % CHG 1-Day YTD PER US$ Wed Tues Americas Argentina peso Brazil real Canada dollar Chile peso Colombia peso Ecuador US dollar Mexico peso Peru new sol Uruguay peso Venezuela b. fuerte 0.1188 0.4475 0.9185 0.001698 0.0005172 1 0.0763 0.3510 0.04187 0.15748031 0.1190 0.4462 0.9150 0.001697 0.0005178 1 0.0763 0.3504 0.04202 0.15748031 0.18 -0.27 -0.39 -0.09 0.13 unch -0.08 -0.16 0.37 unch 29.1 -5.4 2.5 12.0 0.2 unch 0.4 1.6 12.7 ynch 8.4155 2.2348 1.0887 588.76 1933.65 1 13.0984 2.8491 23.8850 6.3500 8.4006 2.2409 1.0929 589.30 1931.20 1 13.1085 2.8538 23.7960 6.3500 Asia-Pacific Australian dollar 1-mos forward 3-mos forward 6-mos forward -4.6 -4.8 -4.8 -4.8 1.4 unch, China yuan -2.4 Hong Kong dollar India rupee Indonesia rupiah Japan yen 1-mos forward 3-mos forward 6-mos forward Malaysia ringgit New Zealand dollar Pakistan rupee Philippines peso Singapore dollar South Korea won Taiwan dollar Thailand baht Vietnam ng 0.9346 0.9326 0.9287 0.9229 0.1628 0.1290 0.01656 0.0000849 0.00954 0.00954 0.00955 0.00956 0.3145 0.8327 0.00978 0.0229 0.7991 0.0009812 0.03335 0.03122 0.00005 0.9276 0.9255 0.9217 0.9160 0.1627 0.1290 0.01650 0.0000851 0.00952 0.00952 0.00952 0.00953 0.3148 0.8316 0.00978 0.0230 0.7978 0.0009822 0.03336 0.03113 0.00005 -0.76 -0.77 -0.76 -0.75 -0.11 unch -0.36 0.20 -0.28 -0.29 -0.29 -0.29 0.10 -0.13 unch 0.14 -0.16 0.10 unch -0.30 0.13 -3.2 -0.5 -0.5 -0.5 -0.5 -3.1 -1.3 -3.0 -1.7 -0.9 -3.5 0.2 -2.1 0.4 1.0699 1.0723 1.0767 1.0835 6.1410 7.7502 60.39995 11777 104.80 104.77 104.73 104.62 3.1798 1.2009 102.200 43.620 1.2515 1019.16 29.983 32.031 21224 1.0781 1.0805 1.0850 1.0917 6.1480 7.7502 60.61995 11753 105.09 105.07 105.03 104.93 3.1766 1.2025 102.235 43.560 1.2535 1018.13 29.975 32.128 21196 Europe Czech Rep. koruna Denmark krone Euro area euro Hungary forint Norway Krone Poland zloty Romania leu Russia ruble Sweden krona Switzerland franc 1-mos forward 3-mos forward 6-mos forward Turkey lira UK pound 1-mos forward 3-mos forward 6-mos forward 0.04750 0.1766 1.3150 0.00418885 0.1608 0.3134 0.2989 0.02716 0.1428 1.0897 1.0900 1.0907 1.0919 0.4635 1.6461 1.6458 1.6449 1.6432 0.04734 0.1763 1.3134 0.00416204 0.1616 0.3119 0.2977 0.02670 0.1425 1.0881 1.0884 1.0891 1.0904 0.4603 1.6469 1.6465 1.6457 1.6440 -0.34 -0.12 -0.12 -0.64 0.49 -0.47 -0.39 -1.70 -0.18 -0.15 -0.14 -0.14 -0.14 -0.71 unch 0.05 0.05 0.05 5.9 4.3 4.5 10.4 2.4 5.5 2.8 11.8 8.8 2.8 2.7 2.7 2.7 0.4 0.6 21.054 5.6635 0.7605 238.73 6.2177 3.1906 3.3459 36.814 7.0032 0.9177 0.9175 0.9169 0.9158 2.1573 0.6075 0.6076 0.6079 0.6086 21.124 5.6706 0.7614 240.27 6.1874 3.2057 3.3588 37.451 7.0156 0.9190 0.9188 0.9182 0.9171 2.1726 0.6072 0.6073 0.6077 0.6083 0.6 0.6 0.6 Middle East/Africa Bahrain dinar Egypt pound Israel shekel Jordan dinar Kenya shilling Kuwait dinar Lebanon pound Saudi Arabia riyal South Africa rand UAE dirham Source: ICAP plc 2.6522 0.1399 0.2795 1.4115 0.01127 3.5102 0.0006610 0.2666 0.0936 0.2722 2.6532 0.1398 0.2797 1.4115 0.01130 3.5078 0.0006609 0.2666 0.0931 0.2722 unch unch 0.09 unch 0.23 -0.07 unch unch -0.51 unch unch 2.8 3.2 0.1 2.6 0.9 0.5 yach 1.9 unch 0.3771 7.1504 3.5784 0.7085 88.699 0.2849 1512.75 3.7504 10.6861 3.6732 0.3769 7.1507 3.5750 0.7085 88.495 0.2851 1513.05 3.7506 10.7407 3.6732
