Question

1. If you are a Japanese producer who sells products in the US, you want a foreign exchange future without going through the futures market. So, you borrow money in dollars with an interest rate of 5% and immediately convert it to yen at a rate of 1 dollar to 100 yen. Then you put the money in a Japanese interest-bearing account with an interest rate of 10%. What is the forward exchange rate in this case? 104.76 yen to dollars 95.45 yen to dollars 94.88 yen to dollars 105.12 yen to dollars 1 point 2. Why is it difficult to determine the spot price of oil? Oil is highly dependent on politics and thus can change very rapidly. Oil is primarily sold in long-term contracts, so there is no clear spot price of oil. Oil is primarily traded in private markets, so very few people know how much money it is selling for. Oil cannot be stored efficiently, and thus special types of futures contracts are needed which do not incorporate spot price. 1 point 3. Intel Corp has a share price of $31.63 and a yearly dividend of $1.50 per year. An option with a strike price of $27 has a call price of $6.10, and a put price of $2.65. Assuming no interest, what is the predicted share price according to the put-call parity relationship?

Answer 1

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