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On which day did John receive a margin call

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Reference no: EM132929023

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Q1: Graylon, Inc., based in Washington, exports products to a German firm and will receive payment of 359,737 euros in three months. On June 1, the spot rate of the euro was $1.19, and the 3-month forward rate was $1.20. On June 1, Graylon negotiated a forward contract with a bank to sell 359,737 euros forward in 3 months. The spot rate of the euro on September 1 is $1.24. How many dollars will Graylon receive for the euros (round up to a dollar)?

Q2: Your company expects to receive 5,000,000 Japanese yen 60 days from now. You decide to hedge your position by selling Japanese yen forward. The current spot rate of the yen is $.0089, while the forward rate is $.0095. You expect the spot rate in 60 days to be $.0090. How many dollars will you receive for the 5,000,000 yen 60 days from now if you sell yen forward (round up to a dollar)?

Q3: The 125-day forward rate for the euro is $1.13, while the current spot rate for the euro is $1.14. What is the annualized percentage (%) of forward premium or discount of the euro (round up to 2 decimals)?

Q4: Which of the following is true for futures, but not for forwards?

a. Self-regulated market

b. No transactions costs

c. Clearing operation

d. Actual delivery

Q5: Currency futures can be used by MNCs to hedge payables. That is, an MNC would ____ futures to hedge a foreign payable position. Also, currency futures can be used for speculation. For example, a speculator expecting a currency to appreciate would ____ futures.

a. buy; sell

b. sell; sell

c. buy; buy

d. sell; buy

Q6: The current spot exchange rate is GBP/USD=1.12 and the 3-month forward rate is GBP/USD=1.20. Based on your analysis of the exchange rate, you are confident that the spot exchange rate will be GBP/USD=1.15 in 3 months. Assume that you would like to buy or sell 1 million pounds. What actions do you need to take to speculate in the forward market?

a. buy forward now and sell 1 million pounds in 3 months

b. buy forward in 3 months and sell 1 million pounds now

c. sell forward in 3 months and buy 1 million pounds now

d. sell forward now and buy 1 million pounds in 3 months

Q7: The current spot exchange rate is GBP/USD=1.12 and the 3-month forward rate is GBP/USD=1.20. Based on your analysis of the exchange rate, you are confident that the spot exchange rate will be GBP/USD=1.15 in 3 months. Assume that you would like to buy or sell 1 million pounds. What is the expected dollar profit from speculation?

Q8: The current spot exchange rate is GBP/USD=1.12 and the 3-month forward rate is GBP/USD=1.20. Based on your analysis of the exchange rate, you are confident that the spot exchange rate will be GBP/USD=1.15 in 3 months. Assume that you would like to buy or sell 1 million pounds. What would be your speculative profit or loss in dollar terms if the spot exchange rate turns out to be GBP/USD =1.21?

Q9: The interbank forward price for 8/16 on the pound is GBP/USD = 1.851. At the same time, the price of a CME sterling futures specifying 62,500 pounds for delivery on 8/16 is GBP/USD = 1.872. How could we profit from this situation?

Q10: The interbank forward price for 8/16 on the pound is GBP/USD = 1.851. At the same time, the price of a CME sterling futures specifying 62,500 pounds for delivery on 8/16 is GBP/USD = 1.872. How much is the arbitrage profit?

Q11: John bought a futures contract worth 12.5 million JPY at a future rate of $0.9029 per 100 yen and maturing in Dec. John made an upfront payment of $5,000 to open a position, and the CME required a $3,000 maintenance margin for his account. At the end of the first day, the spot rate of JPY was $0.8910 per 100 yen. At the end of the second day, the spot rate of JPY was $0.8868 per 100 yen. On which day did John receive a margin call? How much should John deposit to his account to maintain the long position?

Reference no: EM132929023

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