1/You enter into a futures contract to buy €125,000 at $1.28 per euro.

Your initial
performance bond is $6,800 and your maintenance level is $2,700.
At what settle price will you get a margin call? (X<$1.2472 per euro)
Under what circumstances could $1,500 be withdraw from the margin account?
(X≥$1.292 per euro)
2/ Citicorp sells a call option on Mexico peso (Contract size Ps500,000) at a
premium of $0.04 per peso. If the exercise price is $0.71 and the spot price of peso
at date of expiration is $0.69. What is Citicorp’s profit (loss) on the call option?
($20,000)
3/ If annualized interest rates in the U.S and Switzerland are 10% and 4%,
respectively, and the 90-day forward rate for the Swiss franc is $0.3864, and what
current spot rate will interest rate parity hold? (s=$0.3807)
4/ Suppose Apple is selling Macintosh computers in Switzerland for SFr5,500
when the exchange rate is $0.68/SFr. If the SFr rises to $0.71, what price must
Apple charge to maintain its dollar unit revenue? (SFr 5268)
5/ Suppose annual inflation rates in the U.S. and Mexico are expected to be 6% and
80%, respectively, over the next several years. If the current spot rate for Mexican
peso is $0.005, then the best estimate of the peso's spot value in 3 years is
(0.00102)
6/Tim is a foreign exchange trader with Citibank. He notices the following quotes.
Spot exchange rate $1.5536/£
Six-month forward exchange rate $ 1.5850/£
Six-month $ interest rate 6% per year
Six-month GBP interest rate 4% per year
a. Is the interest rate parity holding? You may ignore transaction costs.
b. Is there an arbitrage opportunity? If yes, show what steps need to be taken to
make arbitrage profit. Assuming that Tim is authorized to work with
$1,000,000, compute the arbitrage profit.
(profit=$10,615.35)