Dear all,
 
I have received a request for some help with regards to the homework question.
 
1(d) Spot rate is A$2.6786-A$2.6826
 
Given 1.70c -1.60c premium
 
Use the short form, Discount Add Premium Minus (DAPM)
 
Hence the A$1,500,000 receivable in 3 months time, requires selling rate
 
Therefore, 3 months forward rate is spot rate +/- margin
 
3 months forward rate = A$2.6826- 0.016= A$ 2.6666
 
Note that the interest rate given is per annum.
 
 
1(e) Spot rate : Euro 2.1225-Euro 2.1160
 
Paying in first currency, hence use buying rate.
 
Please be Very Careful. Buying rate is the lower rate!!
 
Hence using DAPM (as above),  Euro 2.1160 +0.008 = Euro 2.124
 
 
 
With this you should be able to complete the homework accordingly. Happy studying!

 
Best regards,
Joyce Low