Please help with the calculations on the below questions. 1. Use information fro
ID: 1174965 • Letter: P
Question
Please help with the calculations on the below questions.
1. Use information from the table below to calculate the 30-day, 60-day and 180-day discount or premium for the Mexican peso.
Spot: MXN 1 = $13.3694
30-day forward: MXN 1 = $13.3488
90-day forward : MXN 1 = $13.2219
180-day forward: MXN 1 = $13.1888
2. Use information from the table below to calculate the 30-day, 60-day and 180-day discount or premium for the euro. Spot: Euro 1 = $0.7931
30-day forward : Euro 1 = $0.7942
90-day forward: Euro 1 = $0.7943
180-day forward Euro 1 = $0.7948
3. Assuming there are no transaction costs and supposing that £1 = $1.563740 in New York, $1 = € 0.796178 in Paris, and €1 = £0.803199 in London, calculate the arbitrage opportunities that exist based on these rates. (Briefly show or explain how you arrived at your solutions to get partial credit if one or more answers are incorrect.)
4. Suppose Microsoft Corporation (Microsoft) receives quotes of $0.012524 (bid) and $0.012526 (ask) for the yen( ¥) and $0.033540 (bid) and $0.033541 (ask) for the Taiwan dollar (NT$).
a. How many U.S. dollars will Microsoft receive from the sale of ¥60 million?
b. What is the U.S. dollar cost to Microsoft if it buys ¥1.2 billion?
c. How many NT$ will Microsoft receive for U.S. $700, 000?
d. How many yen will Microsoft receive for NT$400 million?
e. What is the yen cost to Microsoft of buying NT$82 million?
Explanation / Answer
1) Spot: MXN 1 = $13.3694 Calculation % Annualized % 30-day forward: MXN 1 = $13.3488 13.3488/13.3694-1= -0.15% -1.85% 90-day forward : MXN 1 = $13.2219 13.2219/13.3694-1= -1.10% -4.41% 180-day forward: MXN 1 = $13.1888 13.1888/13.3694-1= -1.35% -2.70% Note: Negative sign of % implies discount. 2) Spot: Euro 1 = $0.7931 30-day forward : Euro 1 = $0.7942 0.7942/0.7931-1= 0.14% 1.66% 90-day forward: Euro 1 = $0.7943 0.7943/0.7931-1= 0.15% 0.61% 180-day forward Euro 1 = $0.7948 0.7948/0.7931-1= 0.21% 0.43% Note: Euro is at a premium. 3) The cross rate for pound in terms of dollar = (Pound/Euro)*(Dollar/Euro) = (1/0.803199)*(1/0.796178) = 1.563748 Arbitrage possibility is buying pound directly by paying dollars and then selling through the euro route--buying Euros and then converting the Euros into dollars. 4) a) $ to be received = 60/0.012524 = $ 4,790.801661 million b) $ cost = 1.2*0.012526 = $ 0.015031 billion c) NTS to be received = 700000/0.033540 = $ 2,08,70,602.27 d) Yen to be received = 400*0.033540/0.012526 = 1071.052211 million Yen e) Yen cost = 82*0.033541/0.012526 = 219.5722497 million Yen