Q $1$ to Q $5$ combined: You have just started working as a trader for Credit Suisse $($a big international bank$)$ in

New York.

The following are your quotes for the U$.$S$.$ dollar $($USD$)$ against the Euro $($EUR$)$ for spot, $1$ month forward, $3$

months forward, $6$ months forward and one year forward. All the rates are quoted as the number of USD per

EUR.

Spot exchange rate:

Bid rate $1\mathrm{.}0826$ USD per EUR

Ask rate $1\mathrm{.}0830$ USD per EUR

Forward points:

$1$ month forward $06-11$

$3$ month forward $22-28$

$6$ month forward $45-55$

$1$ year forward $94-114$

Q $1$ & Q $2$: A customer TBI International inc calls you and ask you for the exchange rate at which they can sell

to you $40$ mio USD for delivery $3$ months forward $($mio means million$).$ Remember you are the trader at the

bank, Credit Suisse.

Q $1$: What exchange rate do you quote? Give your answer to $4$ decimal places.

Q $2$: How many EUR will the customer TBI International inc receive in $3$ months time in exchange for the $40$ mio

USD. Give your answer to the nearest EUR.

Q $3$ & Q $4$: A different corporate customer, Wallaby Exports, calls you and ask you for the exchange rate at

which they can sell to you $5\mathrm{.}6$ mio EUR for delivery $6$ months forward. Remember you are the trader at the big

international bank, Credit Suisse.

Q $3$: What exchange rate do you quote? Give your answer to $4$ decimal places expressed as the number of

USD per EUR.

Q $4$: How many USD will the customer, Wallaby Exports, receive in $6$ months time in exchange for the $5\mathrm{.}6$ mio

EUR. Give your answer to the nearest USD.

Q $5$ :

Based on the information in this series of questions $($i$.$e$.,$ Q$1$ to Q$4),$

do you think $($pick the most appropriate choice$)$:

A$./$ US interest$-$rates are higher than Eurozone interest$-$rates.

B$./$ US interest$-$rates are lower than Eurozone interest$-$rates.

C$./$ US interest$-$rates and Eurozone interest$-$rates are the same.

D$./$ I don't know the answer. Oliver the Finance Pug knows the answer but he is fast asleep after a long lunch

and I do not want to wake him.

E$./$ Oliver the Finance Pug has never been to Europe so even he does not know the answer.