Use what you need of the following set of information to answer the following six questions:

S₀ = $1.1338/S₀ = 0.7903/$ S₀ = $1.2653/

E (S_{1 (3-months)}) = $1.1140/F_3-months = $1.1880/

Where: = euro; = British pound; E ( ) = Expected.

1.Is the euro expected to appreciate or depreciate in the coming three-month period against the U.S. dollar? Explain your answer without using any calculations. Now, calculate the expected rate of appreciation or depreciation in the value of the euro over the coming three-month period. Give your answer in percent with four decimal places.

2.Do you think there is anything off or not right about the three-month forward rate given above for the euro? If yes, what is off or wrong with it?

3. If you have $240,000,000 how many euros would you be able to buy for 3-month delivery given the above exchange rates? (Assume no bid/ask spread)

4.If one year ago the spot price of British pounds in terms of the $ was $1.2960/. Do you think the dollar has appreciated or depreciated against the British pound over the last year (explain answer without any calculations)? What was the percentage rate of change in the value of the dollar over the last year? Is your numerical answer consistent with your explanation?

5. If a currency dealer wants to use the above three-month forward rate to quote the three-month euro as a percent premium or discount what rate would he quote? Show all calculations.

6. If a currency dealer wants to use the above three-month forward rate to quote the three-month dollar as a percent premium or discount what rate would she quote? Show all calculations.