Essay about Assignment 1 Solutions - 1066 Words

The Chinese University of Hong Kong CUHK Business School FINA3020 International Finance Assignment 1 Question 1 Hang Seng Bank quotes bid-ask rates of USD/EUR 1.3005 – 1.3007 and JPY/USD 104.30 – 104.40. What would be Hang Seng Bank’s direct asking price of JPY/EUR? The cross-rate of JPY/EUR can be achieved by: JPY JPY USD ï€ ½ ï‚ ´ EUR USD EUR The synthetic ask is the highest product: / EUR /USD / EUR Synthetic StJPY ï€ ½ StJPY ï‚ ´ StUSD , ask , ask , ask ï€ ½ 104.40 ï‚ ´1.3007 ï€ ½ 135.7931 Question 2 A bank is quoting the following exchange rates against the dollar for the Swiss franc and the Australian dollar: CHF/USD = 1.5960 – 70 AUD/USD = 1.7225 – 35 A Swiss firm asks the bank for a CHF/AUD quote. What cross-rate would the bank quote? In†¦show more content†¦The following exhibit shows current exchange rates between the ZAR, CHF, and the USD. ZAR/USD Maturity Spot 30-day 90-day Bid 6.2681 6.2538 6.2104 CHF/USD Ask 6.2789 6.2641 6.2200 Bid 1.5282 1.5226 1.5058 Ask 1.5343 1.5285 1.5115 (a) Describe the currency transaction that Omni should undertake to eliminate currency risk over the 30-day period. To eliminate the currency risk arising from the possibility that ZAR will appreciate against the CHF over the next 30-day period, Omni should sell 30-day forward CHF against 30-day forward ZAR delivery (sell 30-day forward CHF against USD and buy 30day forward ZAR against USD). (b) Calculate the CHF/ZAR cross-currency rate Omni would use in valuing the Swiss equity portfolio. Using the currency cross rates of two forward foreign currencies and three currencies (CHF, ZAR, USD), the exchange would be as follows: 30 day forward CHF are sold for USD. Dollars are bought at the forward selling price of CHF/USD 1.5285 (done at ask side because going from currency into dollars). 30 day forward ZAR are purchased for USD. Dollars are simultaneously sold to purchase ZAR at the rate of ZAR/USD 6.2538 (done at the bid side because going dollars into currency). For every CHF 1.5285 held, ZAR 6.2538 are received; thus the cross currency rate is CHF/ZAR 0.244411398. (c) Calculate the current value of Omni’s Swiss equity portfolio in ZAR. At the time of execution of the forward contracts, theShow MoreRelatedIfsm 300 Umuc Haircuts Stage 2694 Words   |  3 PagesTechnology Solution Proposal Before you begin this assignment, be sure you have read the â€Å"UMUC Haircuts Case Study†, â€Å"UMUC Haircuts Stage 1† Project and the â€Å"Walmart Example.† You will use the strategic business area and process that you selected in Stage 1; review the feedback you received for any recommended changes to your Stage 1 project prior to starting this assignment and be sure you have an appropriate â€Å"process† identified. 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