The spot rate for the Ringgit in Paris is MYR$4\mathrm{.}6926/$

a$)$ Is this a direct or indirect quote in Paris?

b$)$ What should the spot price for the $$ be in Kuala Lumpur?

c$)$ Should the $$ be quoted at $0\mathrm{.}2000$ in Kuala Lumpur, how would a foreign exchange trader react to earn profit. Assume that the trader has an option to use RM$10,000,$ or $10,000$ for foreign exchange trading.

QUESTION $2$

When the Ringgit spot rate was quoted at MYR$4\mathrm{.}6929/$ in Paris, the Paris market was also quoting $$\frac{1\mathrm{.}1100}{}.$

a$)$ What should the price be the dollar be in Kuala Lumpur?

b$)$ If dollar was quoted at MYR$4\mathrm{.}3100/$$ in Kuala Lumpur, what profit opportunities would exists? Assume that you have an option to use RM$10,000$ or $$10,000$ for foreign exchange trading.

QUESTION $3$

The spot rate for the MYR is MYR$4\mathrm{.}6926/$ and the three$-$month forward rate is MYR$4\mathrm{.}6936/.$ Your company is prepared to speculate that the MYR will move to MYR$4\mathrm{.}6976/$ by the end of three months. If your company is prepared to put MYR $1$ million at risk on the deal, show how would you strategize to help your firm to make profit. Ignore all interest rate implications.

QUESTION $4$

A foreign exchange trader gives the following quotes for the MYR spot, one$-$month, three$-$ month and six$-$month to a Malaysian based Chief Financial Officer $($CFO$).$

MYR$4\mathrm{.}6926/-$ MYR$4\mathrm{.}6930/$

Forward Point

$1$ month $\frac{6}{4}$

$3$ month $,\frac{8}{9}$

$6$ month $,\frac{11}{14}$

a$)$ Calculate the outright quotes for one, three and six month.

b$)$ If the CFO wished to buy $10,000$ three months forward, how much would the CFO pay in MYR$?$

c$)$ Assume that the Euros $()$ are being sold by the treasurer, what is the premium or discount, for the one, three and six month forward rates in annual percentage terms? Please state clearly which currency is trading at a forward premium of one, three and six months respectively.

$1$