Spot rates, :Y = 108.10 - 108.20 U.S. 3-month rates: 5.00 - 5.25 (% per year) Japan 3-month rates: 1.25 - 1.50 (% per year) What's the :Y 3-month forward bid and ask exchange rates. Undertsand this and you’ll get a few points in econ easily.
107.06-107.29 ??
107.03-107.27
I hope it’s right 104.09 - 104.50
never mind forgot to convert from anual to 3mo
bid is 107.099, ask is 107.2649
Are we going to get an answer on this? Is this how you set it up? S0* (1+rf(dc))/(1+rf(fc))^(90/365)
107.057-107.287
how interesting. everyone has different answers lol jpsi1 and I are pretty much the same.
107.0330 - 107.2649 is right. this is right. i screwed up my permutations on the bid.
how do you set it up?
I got 107.09 - 107.2 :S Also, I have schweser and still don’t get what up the bid or down the ask mean… it’s on their stupid quick sheet too as their one liner to econ. wtf.
BID --> 108.10 * [1 + .0125(90/360) / 1 + .0525(90/360)] = 107.033 ASK --> 108.20 * [1 + .0150(90/360) / 1 + .0500(90/360)] = 107.265
^^ Couple questions… Why is the Jpy rate on top? Also, why are we discounting the rate to 3 months, when those rates are quoted as 90 day?
i did the same except I used exponent (^1/4) instead of (90/360)
sdanalyst Wrote: ------------------------------------------------------- > ^^ > > Couple questions… > > Why is the Jpy rate on top? > > Also, why are we discounting the rate to 3 months, > when those rates are quoted as 90 day? The exchange rate given is Y/US or US:Y Y is the DC and Us is the FC in this case.
passme Wrote: ------------------------------------------------------- > i did the same except I used exponent (^1/4) > instead of (90/360) same here
Where did you see this problem? Is it in Econ EOC?
Dont use ^(90/360) … check book pg 650.
Yes you all got it: BID --> 108.10 * [1 + .0125(90/360) / 1 + .0525(90/360)] = 107.033 ASK --> 108.20 * [1 + .0150(90/360) / 1 + .0500(90/360)] = 107.265 The trick was that you have to think what you are buying and what you are selling. 1) If you start on the bid, then you are selling the base currency (the one in the bottom), and buying the one on top. 2) To sell the currency you borrow it at the “high” rate. When you buy the other currency, (the yen) you deposit the funds at the low Japanese rate. This is what you see in the first line above BID —>. 3) If you start on the ask, then you are buying the dollar (currency on bottom)…you do the rest.