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  • Quiz 5

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    Aarham Aziz
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    1. The document provides two quiz questions about arbitrage-free exchange rates for forward contracts. The first question asks the student to calculate the arbitrage-free exchange rate for a 1-year forward contract given the spot exchange rate and interest rates of two currencies. It also asks what steps could be taken to make an arbitrage profit if the forward rate was 112. 2. The second question provides the spot price of an asset, costs and benefits of storing the asset over time, and risk-free rate to calculate the one year arbitrage-free forward price of the asset.

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    1. The document provides two quiz questions about arbitrage-free exchange rates for forward contracts. The first question asks the student to calculate the arbitrage-free exchange rate for a 1-year forward contract given the spot exchange rate and interest rates of two currencies. It also asks what steps could be taken to make an arbitrage profit if the forward rate was 112. 2. The second question provides the spot price of an asset, costs and benefits of storing the asset over time, and risk-free rate to calculate the one year arbitrage-free forward price of the asset.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    4 views5 pages

    Quiz 5

    Uploaded by

    Aarham Aziz
    1. The document provides two quiz questions about arbitrage-free exchange rates for forward contracts. The first question asks the student to calculate the arbitrage-free exchange rate for a 1-year forward contract given the spot exchange rate and interest rates of two currencies. It also asks what steps could be taken to make an arbitrage profit if the forward rate was 112. 2. The second question provides the spot price of an asset, costs and benefits of storing the asset over time, and risk-free rate to calculate the one year arbitrage-free forward price of the asset.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 5

    Quiz 5 – 1 PM

    26 Sep 2023
    1. Consider two currencies A and B. The spot exchange rate A/B =
    100. The current interest rate for Currency A is 12% and on
    Currency B is 2%. What is the arbitrage-free exchange rate for a 1-
    year forward contract? If someone is willing to sign a one-year
    forward contract at 112, what steps will you take to make an
    arbitrage profit?

    2. The spot price of an asset is $100. To store this asset the owner
    has to pay $2 after nine months. The owner receives $3 as a
    benefit from this asset after six months. The risk-free rate is 10%.
    What is the one year arbitrage-free forward price on this asset?
    Quiz 5 – 2:30 PM
    26 Sep 2023
    1. Consider two currencies A and B. The spot exchange rate A/B =
    100. The current interest rate for Currency A is 12% and on
    Currency B is 2%. What is the arbitrage-free exchange rate for a 1-
    year forward contract? If someone is willing to sign a one-year
    forward contract at 108, what steps will you take to make an
    arbitrage profit?

    2. The spot price of an asset is $100. To store this asset the owner
    has to pay $3 after nine months. The owner receives $2 as a
    benefit from this asset after six months. The risk-free rate is 10%.
    What is the one year arbitrage-free forward price on this asset?

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