You are a treasure analyst for your bank. One of your large corporate customers is interested in a currency hedge and approached your bank for quotes on forward rates. Using the following data, answer the questions below: Spot USD / JPY 116.00 3 Months DOLLAR Deposit Rate 4.50% p.a. 6 Months DOLLAR Deposit Rate 5.00% p.a. 3 Months YEN Deposit Rate 0.25% p.a. 6 Months YEN Deposit Rate 0.52% p.a. FRA Rate for Yen Nil A ) What would be 6 months USD/JPY Forward Rate? B) What should be 3 month interest rate 3 months Forward? C )The 6 and 12 month USD LIBORS are 5% and 6.5% respectively. A bank is quoting 6/12 USD FRA at 6.50 – 6.75%. What position should you take to make a profit for your bank?

You are a treasure analyst for your bank. One of your large corporate customers is interested in a currency hedge and approached your bank for quotes on forward rates. Using the following data, answer the questions below: Spot USD / JPY 116.00 3 Months DOLLAR Deposit Rate 4.50% p.a. 6 Months DOLLAR Deposit Rate 5.00% p.a. 3 Months YEN Deposit Rate 0.25% p.a. 6 Months YEN Deposit Rate 0.52% p.a. FRA Rate for Yen Nil A ) What would be 6 months USD/JPY Forward Rate? B) What should be 3 month interest rate 3 months Forward? C )The 6 and 12 month USD LIBORS are 5% and 6.5% respectively. A bank is quoting 6/12 USD FRA at 6.50 – 6.75%. What position should you take to make a profit for your bank?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter17: The Management Of Cash And Marketable Securities

Section: Chapter Questions

Problem 2P

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You are a treasure analyst for your bank. One of your large corporate customers is interested in a currency hedge and approached your bank for quotes on forward rates. Using the following data, answer the questions below: Spot USD / JPY 116.00 3 Months DOLLAR Deposit Rate 4.50% p.a. 6 Months DOLLAR Deposit Rate 5.00% p.a. 3 Months YEN Deposit Rate 0.25% p.a. 6 Months YEN Deposit Rate 0.52% p.a. FRA Rate for Yen Nil A ) What would be 6 months USD/JPY Forward Rate? B) What should be 3 month interest rate 3 months Forward?
You are a treasure analyst for your bank. One of your large corporate customers is interested in a currency hedge and approached your bank for quotes on forward rates. Using the following data, answer the questions below: Spot USD / JPY 116.00 3 Months DOLLAR Deposit Rate 4.50% p.a. 6 Months DOLLAR Deposit Rate 5.00% p.a. 3 Months YEN Deposit Rate 0.25% p.a. 6 Months YEN Deposit Rate 0.52% p.a. FRA Rate for Yen Nil C )The 6 and 12 month USD LIBORS are 5% and 6.5% respectively. A bank is quoting 6/12 USD FRA at 6.50 – 6.75%. What position should you take to make a profit for your bank? D) Your bank has a 3 month euro deposit of 10 million which was converted to $TT to support the $TT liquidity position. The bank is concerned about currency risk. Briefly explain the risk to the bank and how can this be hedged using futures and options.
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