When will you pay your dollars and receive your euros

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Reference no: EM13897928

1. If the spot exchange rate of the yen relative to the dollar is ¥105.75 >$, and the 90-day forward rate is ¥103.25 >$, is the dollar at a forward premium or discount? Express the premium or discount as a percentage per annum for a 360-day year.

2. Suppose today is Tuesday, January 18, 2011. If you enter into a 30-day forward contract to purchase euros, when will you pay your dollars and receive your euros? (Hints: February 18, 2011, is a Friday, and the following Monday is a holiday.)

3. As a foreign exchange trader for JPMorgan Chase, you have just called a trader at UBS to get quotes for the British pound for the spot, 30-day, 60-day, and 90-day forward rates. Your UBS counterpart stated, "We trade sterling at $1.7745-50, 47> 44, 88> 81, 125 > 115." What cash flows would you pay and receive if you do a forward foreign exchange swap in which you swap into £5,000,000 at the 30-day rate and out of £5,000,000 at the 90-day rate? What must be the relationship between dollar interest rates and pound sterling interest rates?

Reference no: EM13897928

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