6. Calculate the cross rate between the Colombian peso and the Norwegian krone,
ID: 429925 • Letter: 6
Question
6. Calculate the cross rate between the Colombian peso and the Norwegian krone, using the peso as the base currency.
7. In the 3 months forward market, is the yen trading at a premium or a discount?
8. Choose a vehicle currency other than the Euro or the dollar, and calculate the cross rate between that currency and the Hong Kong dollar.
Currency Table
U.S. dollar foreign-exchange rates in late New York trading
(Source: Wall Street Journal, February 20, 2009)
-FRI-
U.S. $ vs.
YTD chg. (%)
Country, currency
In US$
Per US$
Colombia, peso
.0003874
2581.31
14.8
Hong Kong, dollar
.1290
7.7536
Unch
Japan, yen
.010747
93.05
2.6
3-mos forward
.010769
92.86
2.6
Norway, krone
.1472
6.7935
-2.3
Euro area, euro
1.2837
.7790
8.8
UK pound
1.4426
.6932
1.2
-FRI-
U.S. $ vs.
YTD chg. (%)
Country, currency
In US$
Per US$
Colombia, peso
.0003874
2581.31
14.8
Hong Kong, dollar
.1290
7.7536
Unch
Japan, yen
.010747
93.05
2.6
3-mos forward
.010769
92.86
2.6
Norway, krone
.1472
6.7935
-2.3
Euro area, euro
1.2837
.7790
8.8
UK pound
1.4426
.6932
1.2
Explanation / Answer
6.
With Peso as a base currency, cross rate between Peso and Krone is Peso / Krone.
Peso / Krone = (Peso / Dollar) * (Dollar / Krone)
Peso / Dollar = 2581.31
Dollar / Krone = .1472
Peso / Krone =2581.31 * .1472 = 379.9688
7
Dollar / yen (spot rate) = .010747
Dollar / yen (3 Month forward rate) = .010769
Here, 3 month forward exchange rate is higher than the spot rate. Thus, Dollar is in weaker position relative to Yen. Thus, Yen is trading at premium.
Premium of Yen per Dollar = .010769 - .010747 = .000022
Note: findings will be same when spot and 3 month forward rate of Yen / Dollar is considered.
Note: Pl. repost other unanswered questions to get their proper answers.
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