What is the three-month forward exchange rate

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1) The spot exchange rate of the Swedish krona is equal to 5.7 SKr per U.S. dollar. The three-month interest rates are 12% in SKr and 8% in dollars. What is the three-month forward exchange rate that you should quote? Please calculate the rate. briefly explain your answer.

2) After a careful look at your screen, you discover that the spot exchange rate is really 5.7000-5.7015. The 12-month interest rates are 12.25 - 12.5% in SKr and 8.25 - 8.5% in U.S. dollars. Calculate the bid-ask quote on the one-year forward SKr/$ rate? explain your answer.

3) A Swedish exporting firm expects to be paid $1 million in three months. Please calculate the SKr value of this payment if in three months, the spot exchange rate is equal to SKr/$ = 5 and SKr/$ = 6. What would be the value of this payment if the firm had hedged against currency movements using the forward rate calculated in (a)? explain your answer.

Reference no: EM132406514

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