1) Suppose the current exchange rate between German Mark and US dollar is M 1.55
ID: 2650624 • Letter: 1
Question
1) Suppose the current exchange rate between German Mark and US dollar is M 1.5581 per $, and the 90 days foward rate between these currencies is M 1.5493 per $.
a) M is selling at a premium in the forward market b) M is selling at a discount in the forward market c) $ is selling at a premium in the forward market d) $ is selling at a discount in the forward market
2) The expected rate of return of an investment is 28.36, while its measurement of risk is 4.216. The risk per unit of return on this investment would be
a) 119.57 b) 6.7268 c) 0.1487 d) 35.576
3) Which of the followings would impact the rating of a bond?
a) Maturity b) Overseas operation of the issuing company c) Financial ratios d) All of the above
4) The current exchange rate between French franc and U.S. Dollar is FF 5.529 per dollar. Last month this rate was FF 5.491 per dollar.
a) FF has appreciated b) US $ has depreciated c) FF has depreciated d) US $ has appreciated
Explanation / Answer
1)
Suppose the current exchange rate between German Mark and US dollar is M 1.5581 per $, and the 90 days foward rate between these currencies is M 1.5493 per $.
Annualised Forward Premium on Currency $ = (1.5493-1.5581)/1.5581 * 100 * 12/3
Annualised Forward Premium on Currency $ = - 2.26%
Since Annualised Forward Premium is negative that means $ is selling at a discount in the forward market
Answer
$ is selling at a discount in the forward market
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.