article
36 Points
Joined December 2009
hi,
QUESTION A is a question on covered interest arbitrage,take the forward rate as future spot rate and find the theoretical riskfree rate in home country.if actual rate>theoretical then borrow in foreign country and invest in home country.if theoretical>actual rate then vice versa.
question B
find the future spot rate using interst rate parity theory using given spot rate and find the gain or loss in forward if we enter to sell forward
Question C the rate given in the question is fduture spot rate using that find gain or loss in forwad if it is entered to sell
if the rate in market fall compared to rate we entered in forward it is gain as we entered to sell
if the rate raises then loss