International Financial Management Chapter 5 Final Questions Answers

5.3. A foreign exchange trader with a U.S. bank took a short position of £5,000,000 when the $/£ exchange rate was 1.55. Subsequently, the exchange rate has changed to 1.61. Is this movement in the exchange rate good from the point of view of the position taken by the trader? By how much has the bank’s liability changed because of the change in the exchange rate?
|R1- | | | |
| | | | |
|PV | | |FV |
|5,000,000.00 |SHORT ER |1.55 |7,750,000.00 |
| |CHANGE ER |1.61 |8,050,000.00 |
| | |DIFERENCE |-300,000.00 |

El movimiento perjudica la posición corta del trader ocasionado una minusvalía de $300,000 USD, mismo valor que representa una ganancia para el banco ya que los movimientos del TC se mueven en dirección contraria a como el trader había pensado en un escenario racional.
5.4. Restate the following one-, three-, and six-month outright forward European term bid-ask quotes in forward points. Spot 1.3431-1.3436 One-Month 1.3432-1.3442 Three-Month 1.3448-1.3463 Six-Month 1.3488-1.3508
|R2- | | | | | |
| | | | |SOLUCION |
|SPOT |1.3431 |1.3436 | | | |
|ONE MONTH |1.3432 |1.3442 |ONE MONTH |1 |6