3.A FX dealer in London is quoting the following exchange rates between the Yen

Question

3.A FX dealer in London is quoting the following exchange rates between the Yen (JPY) and Australian Dollar (AUD). JPY/AUD Bid 88.05 87.80 87.15 Ask 88.22 88.12 87.58 Spot a) b) c) Compute the spot, 1-m forward, and 3-m forward transaction costs as a percentage faced by the If a customer wants to buy AUD 5 million in the spot market, how much would it cost the customer? If a customer wants to sell JPY 80 million in three months forward, how much would the customer receive? customer 4 costs in the two cases (- $ vs. , and JPY vs. AUD) Looking at your answers in 2 (d) and 3 (c), briefly compare and comment on the transaction Looking at the quotations in 2 and 3, what can you say about the market's expectations about the S versus euro, and JPY versus AUD? (expectations in terms of how they are expected to change)

Explanation / Answer

1) The customer will pay 88.22 JPY per AUD.There fore it would cost 5 million*88.22=0.4411 bn JPY

2) He would receive 80mn/87.58 AUD= 0.913 mn AUD

3) and 4) More info required.

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