Class Exercise – International FinanceDivision C

Q5. Calculate the gains on the below opportunities of three point arbitrage:

1. USD/CHF 1.3705 – 1.3715 GBP/USD 1.9355 – 1.9365 GBP/CHF 2.6500 – 2.6510 Capital GBP 1 million

2. GBP/USD 1.5183 – 1.5193 GBP/SEK 9.8300 – 9.8400 USD/SEK 6.4825 – 6.4925 Capital USD 1 million

3. EUR/GBP 0.8540 – 0.8550 EUR/JPY 120.90 – 121.40 GBP/JPY 142.50 – 143.00 Capital GBP 1 million

4. GBP/USD 1.5393 – 1.5403 USD/AUD 0.9790 – 0.9800 GBP/AUD 1.5100 – 1.5110 Capital GBP 1 million

5. USD/CAD 1.1003 – 1.1013 USD/GBP 0.5880 – 0.5890 GBP/CAD 1.8685 – 1.8695 Capital GBP 1 million

6. SGD/INR 43.2050 – 43.2100 100 INR/USD 1.8505 – 1.8510 USD/SGD 1.8685 – 1.8695 Capital USD 1 million

Q6. Calculate the forward rates:

1. Spot USD/SEK 6.4950 USD Interest Rate 0.75% SEK Interest Rate 1.50%Calculate 3 month forward USD/SEK Rate

2. 6 month Forward EUR/CAD 1.3493 EUR Interest Rate 1.25% CAD Interest Rate 1.75%Calculate Spot EUR/CAD Rate

3. Spot EUR/USD 1.3115 60 days Forward EUR/USD 1.3104 USD Interest Rate 0.50%Calculate EUR Interest Rate

4. Spot USD/CAD Rate 1.0297 73 Days Forward USD/CAD Rate 1.0307 USD Interest Rate 0.75%Calculate CAD Interest Rate

5. Spot USD/INR Rate 54.8325 3 month Forward 100 INR/USD 1.8135 USD Interest Rate 0.75% Calculate INR Interest Rate

Q7. Calculate the forward rates:

1. Spot USD/CHF 0.9493 – 03 CHF Interest Rates 0.25% - 0.50% USD Interest Rates 0.75% - 1.00%

2. Spot GBP/AUD 1.5352 – 62 120 Days Forward GBP/AUD 1.5441 – 1.5477 AUD Interest Rate ? - 3.25% GBP Interest Rate ? – 1.25%

3. Spot EUR/NZD 1.5340 – 1.5350 2 month Forward 1.5391 – 1.5414 NZD Interest Rate 2.75% - ?EUR Interest Rate 0.50% - ?

4. Spot USD/SEK Rate 5.7925 – 75 SEK Interest Rate 1.25% - 1.50%USD Interest Rate 0.50% - 0.75% Calculate 3 month Forward USD/SEK Rate