Assumptions Values

Beginning your trip with euros 10,000.00

Spot rate ($/) 1.4260
Spot rate (Rubles/$) 24.75
a) Calculate the cross rate
Cross rate (Rubles/) 35.29
Rubles/ = Rubles/$ x $/
b) What would be the proceeds in Rubles?
Converting your euros into Rubles 352,935
Problem 5.1 Paris to St. Petersburg
On your post-graduation celebratory trip you are leaving Paris for St. Petersburg,
Russia. You leave Paris with 10,000 euros in your money pouch. Wanting to
exchange all of these for Russian rubles, you obtain the following quotes.
Assumptions Values
Spot exchange rate:
Bid rate (SF/$) 1.2575
Ask rate (SF/$ 1.2585
One-month forward 10 to 15
3-months forward 14 to 22
6-months forward 20 to 30
a) Calculate outright quotes Bid Ask Spread
One-month forward 1.2585 1.2600 0.0015
3-months forward 1.2589 1.2607 0.0018
6-months forward 1.2595 1.2615 0.0020
b) What do you notice about the spread?
It widens, most likely a result of thinner and thinner trading volume.
Added/optional question: What is the 6-month Swiss bill rate?
Spot rate, midrate (SF/$) 1.2580
Six-month forward rate, midrate (SF/$) 1.2605
Maturity (days) 180
6-month US dollar treasury rate (yield) 4.200%
Solving for implied SF interest rate 6.450%
Check calculation: the six-month forward 1.2719
You receive the following quotes for Swiss francs against the dollar for spot, one-month forward, 3-
months forward, and 6 months forward.
Problem 5.2 Basel Trading