Suppose that you are quoted the following FC/NZD spot and forward rates: Spot bid-ask p.a. 3...

 

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Suppose that you are quoted the following FC/NZD spot and forward rates: Spot bid-ask p.a. 3 month 6-mo.forward Euro-interest bid-ask p.a. 6 month Euro-interest 3-mo. forward bid-ask NZD 0.5821-0.5867 0.5103 0.5142 USD 0.5791-0.5835 EUR 0.5120-0.5159 6.08-6.33 DKK 3.3890-3.4150 3.3350-3.4410 6.05-6.30 CAD 0.5973-0.6033 0.5987-0.6025 1.71-1.96 GBP 0.3924-0.3954 0.3933-0.3989 5.09 5.34 5.65 5.90 3.63 3.88 5.47-5.82 3.94-4.19 0.5839 0.5895 0.5101-0.5146 5.60 6.25 3.3720 3.4110 5.93 6.18 0.5023 0.5099 2.47-2.75 0.3929 0.3001 5.10 5.35 (a) What are the three-month synthetic-forward USD/NZD bid-ask rates? (b) What are the six-month synthetic-forward EUR/NZD bid-ask rates? (c) What are the six-month synthetic-forward DKK/NZD bid-ask rates? (d) What are the three-month synthetic-forward CAD/NZD bid-ask rates? (e) In a-d, are there any arbitrage opportunities? What about least cost dealing at the synthetic rate? Suppose that you are quoted the following FC/NZD spot and forward rates: Spot bid-ask p.a. 3 month 6-mo.forward Euro-interest bid-ask p.a. 6 month Euro-interest 3-mo. forward bid-ask NZD 0.5821-0.5867 0.5103 0.5142 USD 0.5791-0.5835 EUR 0.5120-0.5159 6.08-6.33 DKK 3.3890-3.4150 3.3350-3.4410 6.05-6.30 CAD 0.5973-0.6033 0.5987-0.6025 1.71-1.96 GBP 0.3924-0.3954 0.3933-0.3989 5.09 5.34 5.65 5.90 3.63 3.88 5.47-5.82 3.94-4.19 0.5839 0.5895 0.5101-0.5146 5.60 6.25 3.3720 3.4110 5.93 6.18 0.5023 0.5099 2.47-2.75 0.3929 0.3001 5.10 5.35 (a) What are the three-month synthetic-forward USD/NZD bid-ask rates? (b) What are the six-month synthetic-forward EUR/NZD bid-ask rates? (c) What are the six-month synthetic-forward DKK/NZD bid-ask rates? (d) What are the three-month synthetic-forward CAD/NZD bid-ask rates? (e) In a-d, are there any arbitrage opportunities? What about least cost dealing at the synthetic rate?

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To calculate the syntheticforward rates we need to use the interest rate differentials and the spot and forward rates provided Lets calculate the rate... View the full answer