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Suppose Bank of Nova Scotia (a Canadian bank) quotes spot and 90- day forward rates of...

Suppose Bank of Nova Scotia (a Canadian bank) quotes spot and 90- day forward rates of $0.7159-61 and $0.6445-50 for one Canadian Dollar (CAD) respectively.

  1. (a) What are the outright 90-day forward rates that Bank of Nova Scotia is quoting?

  2. (b) What is the forward discount or premium associated with buying 90-day Canadian dollar?

  3. (c) Compute the percentage bid-ask spreads on spot and forward Canadian dollar.

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Answer #1

(a) What are the outright 90-day forward rates that Bank of Nova Scotia is quoting?

$0.6445-50

(b) What is the forward discount or premium associated with buying 90-day Canadian dollar?

0.0711 is the discount

(c) Compute the percentage bid-ask spreads on spot and forward Canadian dollar.

Bid- Ask Spread on spot = 0.0002
Bid- Ask Spread on Forward = 0.0005

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