Todays FT is quoting the following rates for the $HK against the . Jul 29 Closing Change

Question:

Today’s FT is quoting the following rates for the $HK against the €.                                               


Jul 29

Closing

Change

Bid/offer

Three months

One year


mid-point

on day

spread

Rate

%PA

Rate

%PA

HK$

9.4432

+0.0478

414- 449

9.4759

-1.4

9.5928

-1.6









(a) Show how the 3-month and 12-month forward premia (in the column labelled “%PA”) have been computed.

(b) Compute the percentage bid-ask spread.

(c) Given these data, what ought to be the 12-month interest rate differential between the Eurozone and HK?


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