Question
Today, one needs to pay 130 US dollars for 100 euros. Thecontinuously compounded US interest rate is 1% and the continuouslycompounded euro interest rate is
Today, one needs to pay 130 US dollars for 100 euros. Thecontinuously compounded US interest rate is 1% and the continuouslycompounded euro interest rate is 2%.
(1) What is the 9-month forwardprice for 100 Euros?
(2) Suppose you will receive 2mln US dollars and 1 mln. euros in six months. The current forwardprice of a forward contract that matures in six monthsis F0,6mth = 1.2935 USD per 1 euro. Suppose youshort eight forward contracts today (the contract size is 125,000Euro). How many USD and euros will you have in sixmonths?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Personal Finance Turning Money into Wealth
Authors: Arthur J. Keown
7th edition
978-0133856507, 013385650X, 133856437, 978-0133856439
