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Exercise 1: Calculate Forward Exchange Rate in 5 Following Situations

The document contains an exercise with 4 problems calculating forward exchange rates and analyzing option contracts involving currencies like USD, VND, JPY, RUB, SGD, AUD, and CHF. It provides the spot rates, interest rates and calculations to determine the bid and ask forward rates for time periods ranging from 30 days to 6 months. It also outlines how to determine the profit/loss for option contracts involving currencies, given different potential future spot rates, and how to identify the break-even point. Diagrams would be included to illustrate the analyses.

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247 views

Exercise 1: Calculate Forward Exchange Rate in 5 Following Situations

The document contains an exercise with 4 problems calculating forward exchange rates and analyzing option contracts involving currencies like USD, VND, JPY, RUB, SGD, AUD, and CHF. It provides the spot rates, interest rates and calculations to determine the bid and ask forward rates for time periods ranging from 30 days to 6 months. It also outlines how to determine the profit/loss for option contracts involving currencies, given different potential future spot rates, and how to identify the break-even point. Diagrams would be included to illustrate the analyses.

Uploaded by

Lê Hồng Thuỷ
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Name: Lê Hồng Thủy Class: LT1

Exercise 1: Calculate forward exchange rate in 5 following situations:


1. Spot JPY/VND = 200.92/218.83 2. Spot RUB/VND = 380/30
JPY interest rate: 1%-2% per year RUB interest rate: 1.5%-2.5% per year
VND interest rate: 8%-10% per year VND interest rate: 7%-9% per year
a. 3-month F (JPY/VND) = ? a. 3-month F (RUB/VND) = ?
F_bid = 200.92 * (1 + 8% * 3/12)/(1 + 2% * 3/12) F_bid=380*(1 + 7% * 3/12)/(1 + 2,5% * 3/12)
= 203.92 = 384,25
F_ask = 218.83 * (1 + 10% * 3/12)/(1 + 1% * 3/12) F_ask=430*(1+7% * 3/12 )/(1 + 2,5% * 3/12)
= 223.74 = 434,81
b. 6-month F (JPY/VND) = ? b. 6-month F (RUB/VND) = ?
F_bid = 200,92 * (1 + 8% * 6/12)/(1 + 2% * 6/12) F_bid=380*(1+ 7% * 6/12)/(1 + 2,5% * 6/12)
= 209,92 = 388,44
F_ask = 218,83 * (1 + 10% * 6/12)/(1 + 1% * 6/12) F_ask=430*(1 + 7% * 6/12)/(1 + 2,5% * 6/12)
= 228,63 = 439,56
3. Spot SGD/VND = 16,700/00 4. Spot AUD/VND = 16,150/750
SGD interest rate: 1.5%-3% per year AUD interest rate: 2%-3% per year
VND interest rate: 8%-10% per year VND interest rate: 8%-10% per year
a. 30-day F (SGD/VND) = ? a. 30-day F (AUD/VND) = ?
F_bid = 16.700 * (1 + 8% * 30/360)/(1 + 3% * F_bid = 16.150 * (1 + 8% * 30/360) / (1 + 3%
30/360) = 16.769 * 30/360) = 16.217
F_ask = 16.800 * (1 + 10% * 30/360)/(1 + 1.5% * F_ask = 16.750 * (1 + 10% * 30/360) / (1 +
30/360) = 16.919 2% * 30 / 360) = 16.861
b. 60 day F (SGD/VND) = ? b. 60 day F (AUD/VND) = ?
F_bid = 16.700 * (1 + 8% * 60/360)/(1 + 3% * F_bid = 16.150 * (1 + 8% * 60/360) / (1 + 3%
60/360) = 16.838 * 60/360) = 16.284
F_ask = 16.800 * (1 + 10% * 60/360)/(1 + 1.5% * F_ask = 16.750 * (1 + 10% * 60/360) / (1 + 2
60/360) = 17.037 % * 60/360) = 16,972
5. Spot AUD/HKD = 7.0865/00
AUD interest rate: 3.25%-4.75% per year
HKD interest rate: 6%-7.5% per year
a. 30-day F (HKD/AUD) = ?
F_bid (AUD / HKD) = 7,0865 * (1 + 6% * 30/360) / (1 + 4,75% * 30/360) = 7,0939
F_ask (AUD / HKD) = 7,0900 * (1 + 7,5% * 30 / 360) / (1 + 3,25% * 30/360) = 7,1150
b. 60 day F (HKD/AUD) = ?
F_bid (AUD / HKD) = 7,0865 * (1 + 6% * 60/360) / (1 + 4,75% * 60/360) = 7 , 1011
F_ask (AUD / HKD) = 7,0900 * (1 + 7,5% * 60/360) / (1 + 3,25% * 60/360) = 7,1400

Exercise 2:
1. A multinational company is going to
hedge for an inflow of 100,000 USD in the
future. This firm engages in a forward
contract to buy USD by VND in the next 90
days with current annual interest rate of USD
and VND are respectively 1.5-2.5% and 6-
8%. At the contract time, the spot rate of
USD/VND is 21,000/21,500. Define profit/
loss of the firm at maturity if the spot rate of
USD/VND in the next 90 days will
respectively be: 20,933/21,625;
21,058/21,750; 21,183/21,875;
21,308/22,000; 21,433/22,125. Diagram?
2. An American exporter will receive an
amount of 500,000CHF from a Swiss
importer in the next 3 months. This
American firm engages in a forward contract
to sell CHF for USD in the next 03 months
with current annual interest rate of CHF and
USD are respectively 1.25-2.00% and 2.5-
3.5%. At the time of signing (present), the
spot rate of CHF/USD is 0.4880/20. Define
profit/ loss at maturity if the CHF/USD spot
rate at maturity will respectively be:
0.4686/0.4748; 0.4786/0.4848;
0.4886/0.4948; 0.4986/0.5048;
0.5086/0.5148. diagram?
3. Customer is engaging in an Option
contract (American type) to buy 350,000
USD by VND in 180 days. Strike price is
defined as 180-day forward exchange rate
with 135 VND/USD premium. The current
USD/VND spot rate is 20,000/20,500. The
USD and VND annual interest rate are
respectively 1.5-2.5% and 7.5-10%. Define
profit/ loss of this customer at maturity in
the next 180 days if the spot rate at maturity
of USD/VND will respectively be :
19,629/20,500; 20,129/21,000; 20494/
21,365; 20,629/21,500; 21129/22,000.
Define the Break-even point? Diagram?

4. Customer is engaging in an Option


contract (American type) to sell 350,000
USD by VND in 120 days. Strike price is
defined as 120-day forward exchange rate
with 164 VND/USD premium. The current
USD/VND spot rate is 20,000/20,500. The
USD and VND annual interest rate are
respectively 1.5-2.5% and 8.0-11%. Define
profit/ loss at maturity if the spot rate at
maturity of USD/VND will respectively be :
20,000/20,818; 20,200/20,982;
20,364/21,146; 20,500/21,500/
21,000/22,000. Define the Break-even
point? Diagram?

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