Problem 1 The following quotes are given for CAD/EUR: 1.4530/14535, 15-10, 22-14,30-20 for the spot, one...
Problem 1 The following quotes are given for CAD/EUR: 1.4530/14535, 15-10, 22-14,30-20
for the spot, one month, three months and six months forward contracts.
a) calculate the outright quotations and the spread for the spot rate and the 3-month forward contract.
b) how is the spread related to time to maturity of the forward contract?
c) determine the percentage premium/ discount of the Canadian dollar with respect to the euro for the 3 months ask rates (annualized).
Homework Answers
| a) | One month - 1.4515/1.4525 | |
| Two month - 1.4508/1.4521 | ||
| Three month - 1.4500/1.4515 | ||
| b) | The spread is | |
| 1 month - 0.0010 | ||
| 2 month - 0.0013 | ||
| 3 month - 0.0015 | ||
| The spread is more as the maturity increases. | ||
| c) | Percentage premium/(discount) wrt 3 months ask rate = 1.4515/1.4535-1 = | -0.14% |
| Annualized rate = -0.14%*4 = | -0.55% |
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