Question 3: Aussie Dollar Forward (3 marks) E K A D F H 1 Question 3: Aussie Dollar Forward (3 marks) 2 Use the following spot and forward bid-ask rates for the U.S. dollar Australian dollar (USS=A$1.00) exchange rate 3 from December 10, 2010, to answer the following questions 4 7 spot 5 USS/AS USS/AS 6 Period Bid Rate Ask Rate 0.98510 0.98540 8 1 month 0.98131 0.98165 9 2 months 0.97745 0.97786 10 3 months 0.97397 0.97441 11 6 months 0.96241 0.96295 12 12 months 0.93960 0.94045 13 24 months 0.89770 0.89900 14 15 a. What is the mid-rate for each maturity? 16 b. What is the annual forward premium for all maturities? 17 c. Which maturities have the smallest and largest forward premiums? 18 Question 3: Aussie Dollar Forward (3 marks) Use the following spot and forward bid-ask rates for the U.S. dollar Australian dollar (USS=A$1.00) exchange rate from December 10, 2010, to answer the following questions Period spot 1 month 2 months 3 months 6 months 12 months 24 months USS/AS Bid Rate 0.98510 0.98131 0.97745 0.97397 0.96241 0.93960 0.89770 USS/AS Ask Rate 0.98540 0.98165 0.97786 0.97441 0.96295 0.94045 0.89900 a. What is the mid-rate for each maturity? b. What is the annual forward premium for all maturities? c. Which maturities have the smallest and largest forward premiums