For 1 and 2, the information is available at almost all Investment and Financial websites.
Research and find an appropriate graph for the current yield curve (U.S Government Bonds).
Copy and paste the yield curve (or print the page). Briefly analyze what the markets are
predicting for future short term interest rates based on the yield curve.
Find an appropriate graph for the USD EUR exchange rate. Compare graphically the exchange
rates between the two currencies between the period mid 2007 mid 2010, and between the
period mid 2010 mid 2017. Briefly explain.
Hedging using forward rates:
Assume the spot rate on Friday between the USD and GBP was 1.6187 USD per GBP.
Suppose you are purchasing 200000 GBP worth of Scotch Whisky deliverable (product
and payment) in 3 months with the contract set up between you and your supplier on
Friday. How much is that shipment worth in USD. Assume that you want to hedge
against exchange rate risk, and go to the bank on Friday. The financial specialist at the
bank gives you the official 3 month forward rate at 1.6175 USD per GBP. What does that
imply for your payment to the bank in 3 months to get the 200000 GBP?
Assume the spot rate on Friday between the JPY and USD was 101.25 JPY per USD.
Suppose you are purchasing 2000000 JPY worth of microprocessors deliverable (product
and payment) in 3 months with the contract set up between you and your supplier on
Friday. How much is that shipment worth in USD. Assume that you want to hedge
against exchange rate risk, and go to the bank on Friday. The financial specialist at the
bank gives you the official 3 month forward rate at 101.18 JPY per USD. What does that
imply for your payment to the bank in 3 months?
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