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1. The foreign exchange quotations shown below are for the Swiss franc (SF) and the U.S. dollar ($).

U.S. Dollar Equivalent Currency per U.S. Dollar
Wednesday Tuesday Wednesday Tuesday
Bid Ask Bid Ask Bid Ask Bid Ask

Spot 0.6506 0.6508 0.6536 0.6539 1.5365 1.5370 1.5293 1.5300
30 day 0.6496 0.6500 0.6523 0.6529 1.5385 1.5400 1.5315 1.5330
90 day 0.6470 0.6481 0.6499 0.6515 1.5430 1.5457 1.5350 1.5386

Answer the following questions based on the exchange rates shown in the table above.

a. What is the percentage appreciation/depreciation of the SF using indirect ask quotes for the SF?

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b. What is the percentage premium/discount on the SF using indirect bid quotes for the dollar? Using a 30-day forward rate?

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c. A customer wishes to buy the SF on Wednesday. What is the exchange rate for this transaction using indirect quotes for the SF?

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d. Show the point quotes on Wednesday using indirect quotes for the dollar. Without doing any calculation, can you identify the currency on premium? Also, give a rationale for your answer.

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a. The required quote is
US $ equivalent
Wed Tue.
Spot 0.6508 0.6539
30day 0.6500 0.6529
90day 0.6481 0.6515

Using spot rate and 30 day forward rate of Tuesday, the annualized appreciation/ depreciation of SF = (0.6529-0.6539) / 0.6539 *100*12/1 = (1.84) %. i.e. depreciation of 1.84%.
Using spot rate and 90 day forward rate of Tuesday, the annualized appreciation/ depreciation of SF = (0.6515-0.6539) / 0.6539*100*12/3 = (1.76) % i.e. depreciation of 1.76%
Using spot rate and 30 day forward rate of Wednesday, the annualized appreciation/ depreciation ...

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