1. If a swap quote on euro ($/) is $1.1050-60 6-8, what is the outright forward rate? Is the forward rate quoted at a premium or discount? 2. Using the following market information, answer the questions below: Spot exchange rate (C$/$): Three-month forward rate (C$/$): US interest rate: C$ interest rate: 3%
1.0485 1.0550 2%
(a)Calculate the three-month equilibrium forward rate for US$
(b)Using the equilibrium forward rate, calculate the forward premium/discount on the US$. (c) Does the information provided above offer any arbitrage opportunity? (d)If yes to (c), calculate the profit an arbitrager can lock in.