I just need a Longterm Forecasting spreadsheet and the six graphs depicting the mechanical and technical rules for problem set 3. thanks

PROBLEM SET 03

FOREIGN EXCHANGE MARKET

1. The beginning spot rate is C$0.1854 per South African rand and the ending spot rate is C$0.20394/Rand.

a) Calculate the percentage change in the exchange rate for the rand.

% Change in Rand= (0.20394 - 0.1854) / (0.1854) = 0.10 or 10% FWD Premium

b) Calculate the percentage change in the exchange rate for the Canadian dollar.

% Change in C$= (0.1854 - 0.20394) / (0.20394) = -.09 or - 9% FWD Discount

2. The beginning spot rate is Euro0.1040 per Korean won and the ending spot rate is Euro0.0936 per won.

a) What is the percentage change in the exchange rate for the won?

% Change in Won= (0.0936 - 0.1040) / (0.1040) = - 0.10 or - 10% FWD Discount

b) What is the percentage change in the exchange rate for the Euro?

% Change in = (0.1040 - 0.0936) / (0.0936) = 0.1111 or 11.11% FWD Premium

3. Suppose the following exchange rates are available:

Australian Dollar (AUS$) per US dollar = AUS$1.7974/US$

Canadian dollars per US dollar = C$1.5128/US$

Australian Dollar per Canadian dollar = AUS$1.2344/C$

o Assume you are an Australian trader with AUS$1,000,000. What will you do?

Keep= AUS$1.7974/US$

Cross Rate= C$1.5128/US$ x AUS$1.2344/C$ = AUS$1.8674/US$ < US$

AUS$1,000,000 / AUS$1.7974/US$ x C$1.5128/US$ x AUS$1.2344/C$ = AUS$1,038,945.32

o What is the amount of the profit or loss of the transaction?

1,038,945.32 - 1,000,000.00 = $ 38,945.32

o When will the arbitrage stop?

When there is no profit to be made and the Keep = Cross - an arbitrage will not occur unless there is profit to be made.

4. If the spot rate of the New Zealand dollar is $.4257 and the six-month forward rate of the NZ$ is $.4340, what is the forward premium or discount on an annual basis?

NZ$ = (.4340 - .4257) / (.4257) x (360 / 180) x 100= 3.9% Forward Premium on NZ$

$ = (.4257 - .4340) / (.4340) x (360 / 180) x 100= - 3.82% Forward Discount on $

5. If the value of Canadian dollar is $.6653 and the value of Malaysian ringgit is $.26328, what is the value of the Malaysian ringgit in terms of Canadian dollars?

(US$.26328/Ringgit) / (US$.6653/C$) = C$0.3957/Ringgit

6. If the Japanese yen was worth $.0035 six months ago and is now worth $.0045 today, how much has the yen appreciated or depreciated?

% change = [ (.0045 - .0035) / (.0035) ] x (360 / 180) x 100 = 57.14% that the yen has Appreciated

7.

New Zealand France

Bid Offer Bid Offer

NZ$1.8653/ NZ$1.8658/ NZ$1.8674/ NZ$1.8679/

a.) What will you do if you have ? How much is the profit?

Because there is a gap, there is an opportunity for arbitrage.

Step 1) Buy NZ$ ---- Buy NZ$ in France for NZ$1.8674/

Step 2) Sell NZ$ ---- Sell NZ$ in New Zealand for NZ$1.8658/

Profit is 1.8674 - 1.8658 = NZ$0.0016/

b.) What will you do if you have NZ$? How much is the profit?

The same gap exists, therefore:

Step 1) Buy ---- Buy in New Zealand for NZ$1.8658/

Step 2) Sell ---- Sell in France for NZ$1.8674/

Profit is the same as before = NZ$0.0016/

8.

New Zealand France

Bid Offer Bid Offer

NZ$1.9643/ NZ$1.9688/ NZ$1.9654/ NZ$1.9672/

a.) What will you do if you have ? How much is the profit?

There is an overlap between the two markets (No gap) so there is no opportunity to make an arbitrage. So you do nothing.

b.) What will you do if you have NZ$? How much is the profit?

There is an overlap between the two markets (No gap) so there is no opportunity to make an arbitrage. So you do nothing.