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Q1. You are given the following information: Spot EUR/USD : 0.7940/0.8007 Spot USD/GBP: 1.8215/1.8240 Three months swap: 25/35 Calculate three month EUR/USD rate.

June 05, 2012 By: Meliza Category: 1st SEM

Ans:-

Forward Points = ((Spot * (1 + (OCR rate * n/360))) / (1 + (BCR rate * n/360))) – Spot

OCR = Other Currency Rate

BCR = Base Currency Rate

Forward points = ((0.07940 * (1 + (0.018215 * 90/360))) / (1 + (0.08007 * 90/360))) — 0.07940

SWAP = -0.00120

Forward rate = 0.07940 – 0.00120 = 0.0782

Customer sells EUR 3 Mio against USD at 0.0782 at 3 month (0.07940 – 0.00120).

Customer wants to Buy EUR 3 Mio against USD 3 months forward.

 

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