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Question 2 The following wholesale exchange rates are taken from Oanda.com on September 21, 2020. Currency Pair AUD/USD Bid Ask 0.7306 0.7307 AUD/JPY AUD/CAD AUD/NZD AUD/CHF 76.25 76.32 0.9626 0.9634 1.0781 1.0795 0.6648 0.6653 The forward quotes in point form are as follows for the currency pairs AUD/USD and AUD/CHF as of September 21, 2020. 1-year forward points Currency 1-month forward 3-month forward points Bid points Bid Pair Ask Ask Bid Ask AUD/USD AUD/CHF 0.6000 0.7000 2.000 2.3000 4.000 5.5000 -6.4000 -6.2400 -16.9000 -16.5200 -70.5000 -68.5000 d) Calculate the outright forward rates for the currency pair AUD/CHF. e) Calculate the outright forward rates for the currency pair AUD/USD. f) Calculate the forward premium (discount) based on the rates calculated in e) above. g) Do the forward rates imply a strengthening or weakening of the USD with respect to the Australian dollar? Explain your logic.

Question 2 The following wholesale exchange rates are taken from Oanda.com on September 21, 2020. Currency Pair AUD/USD Bid Ask 0.7306 0.7307 AUD/JPY AUD/CAD AUD/NZD AUD/CHF 76.25 76.32 0.9626 0.9634 1.0781 1.0795 0.6648 0.6653 The forward quotes in point form are as follows for the currency pairs AUD/USD and AUD/CHF as of September 21, 2020. 1-year forward points Currency 1-month forward 3-month forward points Bid points Bid Pair Ask Ask Bid Ask AUD/USD AUD/CHF 0.6000 0.7000 2.000 2.3000 4.000 5.5000 -6.4000 -6.2400 -16.9000 -16.5200 -70.5000 -68.5000 d) Calculate the outright forward rates for the currency pair AUD/CHF. e) Calculate the outright forward rates for the currency pair AUD/USD. f) Calculate the forward premium (discount) based on the rates calculated in e) above. g) Do the forward rates imply a strengthening or weakening of the USD with respect to the Australian dollar? Explain your logic.

Fundamentals of Financial Management, Concise Edition (MindTap Course List)
Fundamentals of Financial Management, Concise Edition (MindTap Course List)
9th Edition
ISBN:9781305635937
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter17: Multinational Financial Management
Section: Chapter Questions
Problem 2DQ
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Question 2 The following wholesale exchange rates are taken from Oanda.com on September 21, 2020. Currency Pair AUD/USD Bid Ask 0.7306 0.7307 AUD/JPY AUD/CAD AUD/NZD 76.25 76.32 0.9626 0.9634 1.0781 1.0795 AUD/CHF 0.6648 0.6653 The forward quotes in point form are as follows for the currency pairs AUD/USD and AUD/CHF as of September 21, 2020. Currency 1-month forward 3-month forward 1-year forward Pair points points points Bid Bid Ask Bid Ask Ask AUD/USD AUD/CHF 0.6000 0.7000 2.000 2.3000 4.000 5.5000 -6.4000 -6.2400 -16.9000 -16.5200 -70.5000 -68.5000 d) Calculate the outright forward rates for the currency pair AUD/CHF. e) Calculate the outright forward rates for the currency pair AUD/USD. f) Calculate the forward premium (discount) based on the rates calculated in e) above. g) Do the forward rates imply a strengthening or weakening of the USD with respect to the Australian dollar? Explain your logic.
Transcribed Image Text:Question 2 The following wholesale exchange rates are taken from Oanda.com on September 21, 2020. Currency Pair AUD/USD Bid Ask 0.7306 0.7307 AUD/JPY AUD/CAD AUD/NZD 76.25 76.32 0.9626 0.9634 1.0781 1.0795 AUD/CHF 0.6648 0.6653 The forward quotes in point form are as follows for the currency pairs AUD/USD and AUD/CHF as of September 21, 2020. Currency 1-month forward 3-month forward 1-year forward Pair points points points Bid Bid Ask Bid Ask Ask AUD/USD AUD/CHF 0.6000 0.7000 2.000 2.3000 4.000 5.5000 -6.4000 -6.2400 -16.9000 -16.5200 -70.5000 -68.5000 d) Calculate the outright forward rates for the currency pair AUD/CHF. e) Calculate the outright forward rates for the currency pair AUD/USD. f) Calculate the forward premium (discount) based on the rates calculated in e) above. g) Do the forward rates imply a strengthening or weakening of the USD with respect to the Australian dollar? Explain your logic.
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