5. Given the following facts answer the following: (15 pts.) Three month interest rate 3.20%;...

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5. Given the following facts answer the following: (15 pts.) Three month € interest rate 3.20%; Six month € interest rate 3.59%; Three month $ interest rate 5.25%; Six month $ interest rate 5.45% Spot rate $/ € $1.0990 Transaction date: April 20, 2023 Make sure you clearly label the units for your answers. (Show your work.) What are the forward outright exchange rates for the USD versus the Euro for settlement on July 24, 2023 and October 24, 2023 based on these interest rates? State why this is the settlement date I provided is the correct date to use. b. Now look up the three month forward points on the chart below. Use those points the "arbitrage" profit available by investing in a deposit in each currency versus using a forward exchange transaction. Use the Mid-price or Midpoint rate. i. How much would one make or lose per Euro 1,000,000 invested if you deposited money in Euro and borrowed USD and hedged with a forward swap? ii. How much would one make or lose per Euro 1,000,000 invested if you deposited money in USD and borrowed Euro and hedged with a forward swap? a. Euro/U.S. Dollar (^EURUSD) 1.09696 +0.00139 (+0.13%) 10:27 CT [FOREX] 1.09694 1.09696 FORWARD RATES for Thu, Apr 20th, 2023 Forward Rates Name EUR/USD Overnight Forward EUR/USD Tomorrow Forward EUR/USD Spot Forward EUR/USD 1-Week Forward EUR/USD 2-Week Forward EUR/USD 3-Week Forward EUR/USD 1-Month Forward EUR/USD 2-Month Forward EUR/USD 3-Month Forward EUR/USD 4-Month Forward EUR/USD 5-Month Forward Bid 0.58000 1.77200 0.59700 4.79000 8.64000 12.92000 18.07000 37.61000 52.95400 69.00000 84.40000 Ask 0.59000 1.78000 0.60200 4.84000 8.79000 13.07000 18.52700 37.91000 54.33600 69.60000 85.00000 Alerts Watch I Mid Price 0.58500 1.77600 0.59950 4.81500 8.71500 12.99500 18.30400 37.74000 53.68600 69.30001 84.60000 Time L 06:55 ET 06:55 ET 08:31 ET 10:15 ET 10:15 ET 10:15 ET 10:27 ET 10:27 ET 10:27 ET 10:26 ET 10:27 ET 5. Given the following facts answer the following: (15 pts.) Three month € interest rate 3.20%; Six month € interest rate 3.59%; Three month $ interest rate 5.25%; Six month $ interest rate 5.45% Spot rate $/ € $1.0990 Transaction date: April 20, 2023 Make sure you clearly label the units for your answers. (Show your work.) What are the forward outright exchange rates for the USD versus the Euro for settlement on July 24, 2023 and October 24, 2023 based on these interest rates? State why this is the settlement date I provided is the correct date to use. b. Now look up the three month forward points on the chart below. Use those points the "arbitrage" profit available by investing in a deposit in each currency versus using a forward exchange transaction. Use the Mid-price or Midpoint rate. i. How much would one make or lose per Euro 1,000,000 invested if you deposited money in Euro and borrowed USD and hedged with a forward swap? ii. How much would one make or lose per Euro 1,000,000 invested if you deposited money in USD and borrowed Euro and hedged with a forward swap? a. Euro/U.S. Dollar (^EURUSD) 1.09696 +0.00139 (+0.13%) 10:27 CT [FOREX] 1.09694 1.09696 FORWARD RATES for Thu, Apr 20th, 2023 Forward Rates Name EUR/USD Overnight Forward EUR/USD Tomorrow Forward EUR/USD Spot Forward EUR/USD 1-Week Forward EUR/USD 2-Week Forward EUR/USD 3-Week Forward EUR/USD 1-Month Forward EUR/USD 2-Month Forward EUR/USD 3-Month Forward EUR/USD 4-Month Forward EUR/USD 5-Month Forward Bid 0.58000 1.77200 0.59700 4.79000 8.64000 12.92000 18.07000 37.61000 52.95400 69.00000 84.40000 Ask 0.59000 1.78000 0.60200 4.84000 8.79000 13.07000 18.52700 37.91000 54.33600 69.60000 85.00000 Alerts Watch I Mid Price 0.58500 1.77600 0.59950 4.81500 8.71500 12.99500 18.30400 37.74000 53.68600 69.30001 84.60000 Time L 06:55 ET 06:55 ET 08:31 ET 10:15 ET 10:15 ET 10:15 ET 10:27 ET 10:27 ET 10:27 ET 10:26 ET 10:27 ET

Answer rating: 100% (QA)

a To calculate the forward outright exchange rates for the USD versus the Euro for settlement on July 24 2023 and October 24 2023 we need to use the i... View the full answer