(Solved by Humans)-FIN4000-60 Assignment 2 Due Time: 18:00pm on Apr 20,
Question
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FIN4000-60
Assignment 2
Due Time: 18:00pm on Apr 20, 2016
Release Time: April 14, 2016
Note: You have to show all necessary steps leading to your solutions. Only showing
results without analysis/calculations will be punished by deducting points (at the
discretion of instructor)
1. (4 points)Suppose the quote on pounds is $1.9721-35/?. If you converted
$10,000 to pounds and then back to dollars, how many dollars would you end
up with?
2. (6 points) Suppose the Brazilian Real is quoted at $0.9455-9510, and the Thai
baht is quoted at $25.2513-3986. What is the direct quote for the Real in
Bangkok?
3. (6 points) Suppose a U.S company has to pay ?5million after 3 months. To
hedge this the importer buys a call options on the pounds, and the option
premium is $0.0220/?, the strike price K = $1.50/?
(a) What is the cost incurred today?
(b) What is the ceiling that the importer has set on the price of the pounds?
(c) What is the actual amount that the importer will pay if the spot rate at
the end of 3 months is $1.46/?? How will your answer change if the spot
rate becomes $1.55/?
4. (10 points) Redo the problem on our Chapter 7 slides ?Making to Market? and
?Full Example?, by changing the original problem from ?Short one CME yen
futures contract ...? to ?Long one CME yen futures contract ...?. All other
conditions/data are unchanged. (you need to establish a table similar to our
slides)
5. (5 points) Suppose a company wishes to lock in a 3-month rate to be placed in
6 months. It has been known LIBOR6 is 7.93% and LIBOR9 is 8.11%. What
is the forward forward rate for a LIBOR3 deposit to be placed in 6 months?
6. (6 points) Suppose Dow Chemical receives quotes of $0.008242-45 for the yen
(a) How many U.S. dollars will Dow Chemical receive from the sale of U50
million?
(b) What is the U.S. dollar cost to Dow Chemical of buying U1 billion?
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