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2.08 Exchange Rate Calculations

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112 views

2.08 Exchange Rate Calculations

Uploaded by

gustavo eichholz
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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2.

08 Exchange Rate Calculations

Question 1
An analyst gathers the following information related to the New Zealand dollar (NZD) and the
Australian dollar (AUD):

Based on this information, the maximum arbitrage profits (in AUD) are closest to:
A. 0.0120
B. 0.0238
C. 0.0276

Question 2
If spot exchange rate quotes are 0.1427 CAD/SEK and 0.1366 CAD/NOK, the no-arbitrage
SEK/NOK spot rate is closest to:
A. 0.0195
B. 0.9573
C. 1.0447

Question 3
A GBP/USD forward exchange rate quoted at positive forward points most likely indicates that
GBP:
A. is expected to appreciate against USD.
B. is trading at a forward discount relative to USD.
C. has an interest rate that is lower than the USD interest rate.

Question 4
A currency trader observes the following currency spot exchange rates from two dealers:
Based on only this information, the arbitrage profit available per every CNY 1 is closest to:
A. INR 0.0682
B. INR 0.0064
C. CNY 0.0682

Question 5
The EUR/GBP spot exchange rate is 1.1650. The EUR one-year interest rate is 0.25%, and the
GBP one-year interest rate is 1.50%. The one- year forward exchange rate expressed in
forward points is closest to:
A. −143
B. −115
C. 145

Question 6
An analyst observes the following exchange rate data:

Based only on this information, the arbitrage profit (in USD) available for each USD 1.000
invested is closest to:
A. 0
B. 0.0152
C. 0.0168

Question 7
The USD/GBP spot rate is 1.3075, and the one-year USD/GBP forward rate is 1.3266. If the
one-year USD risk-free interest rate is 4.00%, then the one-year GBP risk-free interest rate is
closest to:
A. 2.50%
B. 2.55%
C. 5.51%

Question 8
A foreign exchange dealer observes that the USD/EUR spot rate is 1.1733, and the two-month
forward rate is 1.1849. Based on this information, the two-month forward points are closest to:
A. 0.0116
B. 1.1600
C. 116.0000

Question 9
A currency trader observes the following spot rates involving the Chinese yuan (CNY), Hong
Kong dollar (HKD), and Australian dollar (AUD):

The no-arbitrage AUD/CNY spot rate is closest to:


A. 0.0215
B. 0.6176
C. 1.6193

Question 10
The SGD/USD spot rate is 1.4148, and the three-month forward rate is 1.4431. Based on this
information, the three-month forward points, expressed as a percentage, are closest to:
A. 1.96
B. 2.00
C. 2.83

Question 11
A currency trader observes the following spot exchange rates involving the British pound (GBP),
US dollar (USD), and Mexican peso (MXN):

If the trader is quoted 27.2511 for the MXN/GBP rate, the most appropriate conclusion is that:
A. no arbitrage opportunity exists.
B. the MXN is undervalued relative to the GBP.
C. risk-free interest rates are higher in Mexico than in the UK.

Question 12
An analyst obtains the following exchange rates among EUR, GBP, and CHF:
If CHF appreciates by 5% versus EUR and EUR appreciates by 2% versus GBP, the
no-arbitrage CHF/GBP rate would be closest to:
A. 1.1951
B. 1.2434
C. 1.3176

Question 13
Which of the following conditions is most likely if the base currency interest rate is lower than the
price currency interest rate?
A. The forward points are positive.
B. The price currency trades at a forward premium.
C. The base currency inflation is greater than price currency inflation.

Question 14
The spot rate is 5.5945 BRL/USD when the one-year, risk-free interest rates are 3.5% in Brazil
and 2.0% in the US. Based on the arbitrage-free BRL/USD forward rate, the BRL is most likely
trading at a:
A. discount to the USD and the forward points are 823.
B. discount to the USD and the forward points are 811.
C. premium to the USD and the forward points are −823.

Question 15
The CAD/USD spot rate is 0.7191 and the one-month forward rate is 0.7131. Based on this
information, the one-month forward points are closest to:
A. −83
B. −60
C. 60

Question 16
An analyst gathers the following spot exchange rate quotes:

The analyst's most appropriate conclusion is that the MXN is:


A. undervalued versus JPY.
B. fairly valued versus JPY.
C. overvalued versus JPY.

Question 17
When the price currency is trading at a forward premium to the base currency, it is most likely
that the:
A. forward points are positive.
B. price currency is expected to appreciate against the base currency.
C. interest rate for the price currency is higher than for the base currency.

Question 18
When the arbitrage-free forward exchange rate is trading lower than the corresponding spot
rate, the price currency most likely:
A. is trading at a discount to the base currency.
B. is expected to depreciate against the base currency.
C. has an interest rate that is lower than the base currency interest rate.

Question 19
The current spot rate between the Russian ruble and Chinese yuan is 10.5000 RUB/CNY. The
Russian annual interest rate is at 7.0% and the Chinese annual interest rate is at 4.0%. The
following one-year forward exchange rate quotes are available from foreign exchange dealers:

An arbitrage opportunity is most likely offered by:


A. Dealer 1 only.
B. Dealer 2 only.
C. both Dealer 1 and Dealer 2.

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