Suppose that the one-year interest rate is 3.50% in the United States and 404% i

Question

Suppose that the one-year interest rate is 3.50% in the United States and 404% in Germany The one-year forward exchange rate is $1.4566/1.00. What should the spot exchange rate be to preclude arbitrage profits? Question 20 options: $1.4490E1.00 $1.,50761.00 $1.5154/E1.00 $1.7382E1.00 $1.2549/E1.00 $1.4642E1.00 Four days ago you entered into a futures contract to sell 125,000 at $1.29 per euro. The spot exchange rate when you entered the contract was $1.26. Your initial performance bond was $5,700 and your maintenance level was $2,300. Over the past four days (in order) the contract has settled at $1.28, $1.31, S1.25, and $1.34. How much in total have you made or lost? Question 21 options: lost $5,000 made $5,000 made 56,250 56,250 ade $10,000 lost 510,000 You enter into a futures contract to buy 125,000 at $1.31 per euro. The spot exchange rate when you enter the contract is $1.15. Your initial performance bond is $5,700 and your maintenance level is $2,300. At what settle price will you get a demand for additional funds to be posted to your account? Question 22 options 1.7372 1.3372 1.1228 Pages:5 of s words, 962 of 100% 23

Explanation / Answer

Solution to First Question:

forward rate/spot rate=(1+dollar interest rate)/(1+germany interest rate)

1.4566/spot rate=(1.035/1.0404)

Spot Rate=$1.4642/euro i.e option 6 i.e last option.

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