216 CHAPTER 5. USING FORWARDS FOR INTERNATIONAL FINANCIAL MANAGEMENT
Spot 1 month 3 month 6 month 12 month1 brl 18.20–18.30 +0.6 +0.8 +2.1 +2.7 +3.8 +4.9 +6.9 +9.1
1 dkk 5.95–6.01 –0.1 –0.2 –0.3 –0.1 –0.7 –0.3 –0.9 +0.1
1 chf 24.08–24.24 +3.3 +3.7 +9.9 +10.8 +19.3 +21.1 +36.2 +39.7
100 jpy 33.38–33.52 +9.5 +9.9 +28.9 +30.0 +55.2 +57.5 +99.0 +105.0
1 eur 39.56–39.79 –1.7 –1.0 –3.4 –1.8 –5.8 –2.9 –10.5 –5.2Choose the correct answer.
i. The one-month forward bid/ask quotes forchfare:
a. 27.387–27.942 b. 25.078–24.357 c. 24.113–24.277 d. 24.410–24.610
ii. The three-month forward bid/ask quotes foreurare:
a. 39.526–39.772 b. 36.167–37.992 c. 39.641–40.158 d. 39.397–39.699
iii. The six-month forward bid/ask quotes forjpyare:
a. 38.902–39.273 b. 88.584–91.025 c. 33.686–33.827 d. 33.932–34.095
iv. The twelve-month forward bid/ask quotes forbrlare:
a. 18.731–19.352 b. 25.113–27.404 c. 17.305–17.716 d. 18.279–18.391- Suppose that you are quoted the followingnzd/fcspot and forward rates:
Spot bid-ask 3-mo. forward p.a. 3 month 6-mo.forward p.a.6 month
bid-ask Euro-interest bid-ask Euro-interest
nzd 5.65–5.90 5.47-5.82
usd 0.5791–0.5835 0.5821–0.5867 3.63–3.88 0.5839–0.5895 3.94–4.19
eur 0.5120–0.5159 0.5103–0.5142 6.08–6.33 0.5101–0.5146 5.60–6.25
dkk 3.3890–3.4150 3.3350–3.4410 6.05–6.30 3.3720–3.4110 5.93–6.18
cad 0.5973–0.6033 0.5987–0.6025 1.71–1.96 0.5023–0.5099 2.47–2.75
gbp 0.3924–0.3954 0.3933–0.3989 5.09–5.34 0.3929–0.3001 5.10–5.35(a) What are the three-month synthetic-forwardnzd/usdbid-ask rates?
(b) What are the six-month synthetic-forwardnzd/eurbid-ask rates?
(c) What are the six-month synthetic-forwardnzd/dkkbid-ask rates?
(d) What are the three-month synthetic-forwardnzd/cadbid-ask rates?
(e) In a–d, are there any arbitrage opportunities? What about least cost
dealing at the synthetic rate?- True or False: Occasionally arbitrage bounds are violated using domestic (“on-
shore”) interest rates because:
(a) Offshore or euromarkets are perfect markets while “on-shore” markets
are imperfect.
(b) Offshore or euromarkets are efficient markets while “on-shore” markets
are inefficient.