Question
. Yesterday, you entered a futures contract to Sell 62,500 British pound, at $1.2517 per BP. Your initial performance bond (margin) is $2,000 and your
. Yesterday, you entered a futures contract to Sell 62,500 British pound, at $1.2517 per BP. Your initial performance bond (margin) is $2,000 and your maintenance level is $1,700. On that day and the following two days the contract settles at 1.2515, 1.2625 and 1.2547. Show your margin in the end of the third day, total position profit. 2. You work for a major French bank providing customers with currency exposure aid. The spot Euro exchange rate is 1.10 $/. Assume the short term yield curve in the US and Europe are flat at 5% and 3% respectively (flat yield curve means that different maturities have all the same annual rates). You are approached by two customers, an exporter and an importer. a. The exporter will receive $100 million in 1 year. He would like to guarantee his Euro revenue. b. The importer must pay $60 million in six months and would like to secure his Euro liability. Solve each customer problem separately, do not expose your employer to any exchange risk, show all the transaction taken (borrowing and lending in the US and/or Europe). Your final result should be a Euro figure in one year for the exporter and in six months for the importer. You must show all the borrowing and lending taking place in the transaction.
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