Forex Spot and Forward Illustration 11

Mid Rate for Citibank is  43.5050 per dollar. Desired Spread is  0.0200 (per one Dollar Transaction) Forward premium/discount for 1 month is 100/80 and for 2 month it is 150/120 Italian Bank quotes 1.4402/1.4490 Euros per Pound.

StanChart quotes 2.4751/2.4792 Australian Dollars per pound.

a)      Calculate Bid and Ask rate for Citibank.

b)      Write forward quotes of Citibank in outright form.

c)      Calculate percentage Spread (Bid Ask Spread) for Italian Bank.

d)     Calculate Cross rate for Australian Dollar per Euro using Italian and StanChart banks.

(1)   Is Rupee weakening against Dollar? Explain.                       (Mumbai University, April 2005)

(Ans.:)

a)      Bid Rate 43.4950, Ask Rate 43.5150

b)      Forward quotes in outright form (Subtract)

c)      Percentage Spread for Italian Bank

d)     Cross Rate for Australian Dollar per Euro

1.7081 Bid and 1.7214 Ask.

e)      No. Examining Citibank quote, Rupee is strengthening.