Problem 7: Based on the information in Problem 6, if you can borrow 100,000 units in forward position at t-0, what would your profit be from CIRP arbitrage (in USD)? usb/EUR =4.32. You want a long forward Problem 8: Assume that rEUR 10%, rus": 3% and X position in EUR 210,000 1-Year forward, i.e. receive EUR one year in the future. Your banker quotes you the following uSD/EUR forward rate:UR1.22. Will you enter the actual forward contract or set up a synthetic forward position? Problem 9: Assume you want a short position in AUD in a 1-Year USD/AUD contract. You calculate the synthetic forward at F USD/AUD- 0.85 and your banker quotes you F SO/AUD = 082 Do you choose the actual forward contract or the synthetic forward? Problem 10: Compute the mark-to-market value of the following short forward NZD (New Zealand Dollar) contract. The size of the short position 's NZD 450,000 and the forward rate is Fuso/Nz. 0.66; the current spot rate (at time of valuation) XU64. The NZD and USD interest rates are: rNZD 9% and rus,, 3%; assume the contract matures in two years from now (so at t+2) Bonus Problem: Which of the following two statements is correct? S1: According to CIRP, the spot price of the high interest rate currency is expected to appreciate. 52: According to CIRP, forward rates and synthetic forward rates are the same a) b) c) d) 51 is true but S2 is false $2 is true but S1 is false Both statements are true Both statements are false Problem 7: Based on the information in Problem 6, if you can borrow 100,000 units in forward position at t-0, what would your profit be from CIRP arbitrage (in USD)? usb/EUR =4.32. You want a long forward Problem 8: Assume that rEUR 10%, rus": 3% and X position in EUR 210,000 1-Year forward, i.e. receive EUR one year in the future. Your banker quotes you the following uSD/EUR forward rate:UR1.22. Will you enter the actual forward contract or set up a synthetic forward position? Problem 9: Assume you want a short position in AUD in a 1-Year USD/AUD contract. You calculate the synthetic forward at F USD/AUD- 0.85 and your banker quotes you F SO/AUD = 082 Do you choose the actual forward contract or the synthetic forward? Problem 10: Compute the mark-to-market value of the following short forward NZD (New Zealand Dollar) contract. The size of the short position 's NZD 450,000 and the forward rate is Fuso/Nz. 0.66; the current spot rate (at time of valuation) XU64. The NZD and USD interest rates are: rNZD 9% and rus,, 3%; assume the contract matures in two years from now (so at t+2) Bonus Problem: Which of the following two statements is correct? S1: According to CIRP, the spot price of the high interest rate currency is expected to appreciate. 52: According to CIRP, forward rates and synthetic forward rates are the same a) b) c) d) 51 is true but S2 is false $2 is true but S1 is false Both statements are true Both statements are false
