TRIDENT, Inc.

1. You find yourself in a difficult position. You CEO has asked you to help her rank these 6 agencies in terms of currency forecasting expertise. You obtain the following information from your departments for the Mexican Peso value for 90 days:

Current spot rate: $ 0.1000/MP (MP = Mexican Peso)

90 day forward rate: $ 0.0995/MP

Forecast of the 90 day rate from agency 1: $ 0.1200/MP

Forecast of the 90 day rate from agency 2: $ 0.0800/MP

Forecast of the 90 day rate from agency 3: $ 0.1500/MP

Forecast of the 90 day rate from agency 4: $ 0.0895/MP

Forecast of the 90 day rate from agency 5: $ 0.1000/MP

Forecast of the 90 day rate from agency 6: $ 0.0994/MP

The actual spot rate 90 days from now: $ 0.1002/MP

Can you rank the agencies in terms of their forecasting expertise? Make sure that you show all your workings for full credit. Provide a brief executive summary to be delivered to your CEO.

2. Now you have a new problem. Your assistant has delivered new information to you stating that the 90 day forward rate has a history of inaccuracies. However, she has information on the 90 day US interest rates (10%) and the 90 day rates in Mexico (30%).

Assuming that the forward is incorrect, how would you rank the 6 agencies?

(Provide answers to each question assuming that they are two independent questions).