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 INSTRUCTOR’S MANUAL: MULTINATIONAL FINANCIAL MANAGEMENT, 9TH ED.

CHAPTER 7

THE FOREIGN EXCHANGE MARKET

Chapter 7 is basically institutional in nature although it opens by discussing the rationale for a foreign exchange
market, namely to facilitate the transfer of purchasing power denominated in one currency to purchasing power
denominated in another currency. Like other financial markets, the foreign exchange market facilitates trading in
financial assets by lowering transaction costs.

The balance of the chapter provides the institutional framework of the foreign exchange market, both spot and
forward transactions. It discusses pricing conventions, costs, size, and participants, and goes through some of the
mechanics of foreign exchange trading. I always illustrate this subject matter with quotes found in The Wall Street
Journal. Every issue of the Journal (Section C) contains a story on the foreign exchange market, providing spot
quotations for the Canadian dollar, pound sterling, Swiss francs, euros, and Japanese yen. The financial section also
carries a more extensive listing of spot and forward prices for about forty currencies.

SUGGESTED ANSWERS TO “ARBITRAGING CURRENCY CROSS RATES”

1. Do any triangular arbitrage opportunities exist among these currencies? Assume that any deviations from the
theoretical cross rates of 5 points or less are due to transaction costs.

ANSWER. Unfortunately, there are no shortcuts here. It is necessary to try out each possibility. Here are the 4
arbitrage opportunities that I found. If anyone finds any additional ones, please contact me at my email address:
ashapiro@marshall.usc.edu.

1. Convert dollars to SFr, SFr to DKr, and DKr back to dollars. The profit per dollar equals $1 x 1.5780 x
3.3818/5.3033 - $1 = $0.0063.

2. Convert dollars to DKr, DKr to pounds, and pounds back to dollars. The profit per dollar equals $1 x
5.3021 x .12381/.6510 - 1 = $0.0084.

3. Convert dollars to pounds, pounds to DKr, and DKr back to dollars. The profit per dollar equals $1 x
.6502 x 8.2031/5.3033 - 1 = $0.0057.

4. Convert dollars to yen, yen to DKr, and DKr back to dollars. The profit per dollar equals $1 x 123.569 x
.04315/5.3033 - 1 = $0.0054.

2. How much profit could be made from a $5 million transaction associated with each arbitrage opportunity?

ANSWER. All the answers are based on rounding the arbitrage profit per dollar to the fourth decimal place.

1. The profit for the $/SFr/DKr/$ arbitrage will be $5,000,000 x 0.0063 = $31,500.

2. The profit from the $/DKr/£/$ arbitrage will be $5,000,000 x 0.0084 = $42,000.

3. The profit from the $/£/DKr/$ arbitrage will be $5,000,000 x 0.0057 = $28,500.

4. The profit from the $/¥/DKr/$ arbitrage will be $5,000,000 x 0.0054 = $27,000.

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CHAPTER 7: THE FOREIGN EXCHANGE MARKET

SUGGESTED ANSWERS TO CHAPTER 7 QUESTIONS

1. Answer the following questions based on data in Exhibit 7.5.

a. How many Swiss francs can you get for one dollar?

ANSWER. The indirect quote is $1 = SFr 1.0534.

b. How many dollars can you get for one Swiss franc?

ANSWER. The direct quote is SFr1 = $0.9493.

c. What is the three-month forward rate for the Swiss franc?

ANSWER. The three-month forward rate is SFr1 = $0.9498.

d. Is the Swiss franc selling at a forward premium or discount?

ANSWER. At a forward premium.

e. What is the 90-day forward discount or premium on the Swiss franc?

ANSWER. The 90-day forward premium is 5 points (pips), which translates into an annualized forward premium of
0.21% (4 x (0.9498 – 0.9493)/0.9493).

2. What risks confront dealers in the foreign exchange market? How can they cope with these risks?

ANSWER. Foreign exchange dealers must cope with exchange risk, because of the foreign currency positions they
take. They also bear credit risks since the counterparties to the trades they enter into may not honor their obligations.

They can cope with currency risk by using forward contracts and currency options (see Chapter 10), widening their
bid-ask quotes, and limiting the position they are willing to take in any one currency. They can limit credit risk by
restricting the position they are willing to take with any one customer and by setting margin requirements that vary
with the riskiness of their customers (banks will generally not do this).

3. Suppose a currency increases in volatility. What is likely to happen to its bid-ask spread? Why?

ANSWER. As a currency's volatility increases, it becomes riskier for traders to take positions in that currency. To
compensate for the added risks, traders quote wider bid-ask spreads.

4. Who are the principal users of the forward market? What are their motives?

ANSWER. The principal users of the forward market are currency arbitrageurs, hedgers, importers and exporters, and
speculators. Arbitrageurs wish to earn risk-free profits; hedgers, importers and exporters want to protect the home
currency values of various foreign currency-denominated assets and liabilities; and speculators actively expose
themselves to exchange risk to benefit from expected movements in exchange rates.

5. How does a company pay for the foreign exchange services of a commercial bank?

ANSWER. Companies compensate banks for foreign exchange services through the bid-ask spread. The bank will
buy foreign exchange at the bid rate (low) and sell at the ask rate (high).

2
 INSTRUCTOR’S MANUAL: MULTINATIONAL FINANCIAL MANAGEMENT, 9TH ED.

ADDITIONAL CHAPTER 7 QUESTION AND ANSWER

1. How have forward premiums and discounts relative to the dollar changed over annual intervals during the past
five years for the Japanese yen, British pound, euro, Swiss franc, and Canadian dollar? Use beginning of year
data.

ANSWER. This question can only be answered by reference to the data.

SUGGESTED SOLUTIONS TO CHAPTER 7 PROBLEMS

1. The $: € exchange rate is €1 = $1.45, and the €/SFr exchange rate is SFr 1 = €0.71. What is the SFr/$ exchange
rate?

ANSWER. SFr1 = €0.71 x 1.45 = $1.0295.

2. Suppose the direct quote for sterling in New York is 1.9110-5. What is the direct quote for dollars in London?

ANSWER. The direct quote for the dollar in London is just the reciprocal of the direct quote for the pound in New
York or 1/1.9115 - 1/1.9110 = 0.5231-3.

3. Using the data in Exhibit 7.5, calculate the 30-day, 90-day, and 180-day forward discounts for the Canadian
dollar.

ANSWER. Here are the relevant rates for the Canadian dollar:
Spot: C$1 = $1.0078
30-day forward: C$1 = $1.0073
90-day forward: C$1 = $1.0069
180-day forward: C$1 = $1.0066

The 30-day forward discount is: [($1.0073 - $1.0078)/$1.0078] x 12 = -0.60%

The 90-day forward discount is: [($1.0069 - $1.0078)/$1.0078] x 4 = -0.36%

The 180-day forward discount is: [($1.0066 - $1.0078)/$1.0078] x 2 = -0.24%

In this case, the forward discounts at these maturities are relatively small, indicating that Canadian and U.S. interest
rates are close to each other.

4. An investor wishes to buy euros spot (at $1.3908) and sell euros forward for 180 days (at $1.3996).

a. What is the swap rate on euros?

ANSWER. A premium of 88 points.

b. What is the premium on 180-day euros?

ANSWER. The 180-day premium is (1.3996 - 1.3908)/1.3908 x 2 = 1.27%.

5. Suppose Credit Suisse quotes spot and 90-day forward rates on the Swiss franc of $0.7957-60, 8-13.

a. What are the outright 90-day forward rates that Credit Suisse is quoting?

ANSWER. The outright forwards are: bid rate = $0.7965 (0.7957 + 0.0008) and ask rate = $0.7973 (0.7960 +
0.0013).

3
CHAPTER 7: THE FOREIGN EXCHANGE MARKET

b. What is the forward discount or premium associated with buying 90-day Swiss francs?

ANSWER. The annualized forward premium = [(0.7973 - 0.7960)/0.7960]x 4 = 0.65%.

c. Compute the percentage bid-ask spreads on spot and forward Swiss francs.

ANSWER. The bid-ask spread is calculated as follows:

Ask price - Bid price

Percent spread = x 100
Ask price

Substituting in the numbers yields a spot bid-ask spread of (0.7960 - 0.7957)/0.7960 = 0.04%. The corresponding
forward bid-ask spread is (0.7973 - 0.7965)/0.7973 = 0.10%.

6. Suppose Dow Chemical receives quotes of $0.009369-71 for the yen and $0.03675-6 for the Taiwan dollar
(NT$).

a. How many U.S. dollars will Dow Chemical receive from the sale of ¥50 million?

ANSWER. Dow must sell yen at the bid rate, meaning it will receive from this sale $468,450 (50,000,000 x
0.009369).

b. What is the U.S. dollar cost to Dow Chemical of buying ¥1 billion?

ANSWER. Dow must buy at the ask rate, meaning it will cost Dow $9,371,000 (1,000,000,000 x 0.009371) to buy ¥1
billion.

c. How many NT$ will Dow Chemical receive for U.S. $500,000?

ANSWER. Dow must sell at the bid rate for U.S. dollars (which is the reciprocal of the ask rate for NT$, or
1/0.03676), meaning it will receive from this sale of U.S. dollars NT$13,601,741 (500,000/0.03676).

d. How many yen will Dow Chemical receive for NT$200 million?

ANSWER. To buy yen, Dow must first sell the NT$200 million for U.S. dollars at the bid rate and then use these
dollars to buy yen at the ask rate. The net result from these transactions is ¥784,334,649.45 (200,000,000 x
0.03675/0.009371).

e. What is the yen cost to Dow Chemical of buying NT$80 million?

ANSWER. Dow must sell the yen for dollars at the bid rate and then buy NT$ at the ask rate with the U.S. dollars.
The net yen cost to Dow from carrying out these transactions is ¥313,886,220.51 (80,000,000 x 0.03676/0.009369)

7. Suppose the euro is quoted at 0.6064-80 in London, and the pound sterling is quoted at 1.6244-59 in Frankfurt.

a. Is there a profitable arbitrage situation? Describe it.

ANSWER. Sell pounds for €1.6447/£ (1/0.6080) in London. Use the Euros to buy pounds for €1.6259/£ in Frankfurt.
There is a net profit of €0.0188 per pound bought and sold–a percentage yield of 1.15% (0.0188/1.6447).

b. Compute the percentage bid-ask spreads on the pound and euro.

ANSWER. The percentage bid-ask spreads on the pound and euro are calculated as follows:

4
 INSTRUCTOR’S MANUAL: MULTINATIONAL FINANCIAL MANAGEMENT, 9TH ED.

£ bid-ask spread = (1.6259 - 1.6244)/1.6259 = 0.09%

Euro bid-ask spread = (0.6080 - 0.6064)/0.6080 = 0.26%

8. As a foreign exchange trader at Sumitomo Bank, one of your customers would like a yen quote on Australian
dollars. Current market rates are:

Spot 30-day
¥101.37-85/U.S.$1 15-13
A$1.2924-44/U.S.$1 20-26

a. What bid and ask yen cross rates would you quote on spot Australian dollars?

ANSWER. By means of triangular arbitrage, we can calculate the market quotes for the Australian dollar in terms of
yen as

¥78.31-81/A$1

These prices can be found as follows. For the yen bid price for the Australian dollar, we need to first sell Australian
dollars for U.S. dollars and then sell the U.S. dollars for yen. It costs a$1.2944 to buy U.S. $1. With U.S. $1 we can
buy ¥101.37. Hence, A$1.2944 = ¥101.37, or A$1 = ¥78.31. This is the yen bid price for the Australian dollar.

The yen ask price for the Australian dollar can be found by first selling yen for U.S. dollars and then using the U.S.
dollars to buy Australian dollars. Given the quotes above, it costs ¥101.85 to buy U.S. $1, which can be sold for
a$1.2924. Hence, A$1.2924 = ¥101.85, or A$1 = ¥78.81. This is the yen ask price for the Australian dollar.

As a foreign exchange trader, you would try to buy Australian dollars at slightly less than ¥78.31 and sell them at
slightly more than ¥78.81. Buying and selling Australian dollars at the market price will leave you with no profit.
How much better than the market prices you can do depends on the degree of competition you face from other
traders and the extent to which your customers are willing to shop around to get better quotes.

b. What outright yen cross rates would you quote on 30-day forward Australian dollars?

ANSWER. Given the swap rates, we can compute the outright forward direct quotes for the yen and Australian dollar
by adding or subtracting the forward points as follows

Spot 30-day 30-day outright forward rates

¥101.37-85/U.S.$1 15-13 ¥101.22-72/U.S.$1
A$1.2924-44/U.S.$1 20-26 A$1.2944-70/U.S.$1

By means of triangular arbitrage, we can then calculate the market quotes for the 30-day forward Australian dollar in
terms of yen as

¥78.04-58/A$1

These prices can be found as follows. For the yen bid price for the forward Australian dollar, we need to first sell
Australian dollars forward for U.S. dollars and then sell the U.S. dollars forward for yen. It costs a$1.2970 to buy
U.S. $1 forward. With U.S. $1 we can buy ¥101.22. Hence, A$1.2970 = ¥101.22, or A$1 = ¥78.04. This is the yen
bid price for the forward Australian dollar.

The yen ask price for the Australian dollar can be found by first selling yen forward for U.S. dollars and then using
the U.S. dollars to buy forward Australian dollars. Given the quotes above, it costs ¥101.72 to buy U.S. $1, which
can be sold for a$1.2944. Hence, A$1.2944 = ¥101.71, or A$1 = ¥78.58. This is the yen ask price for the forward
Australian dollar.

5
CHAPTER 7: THE FOREIGN EXCHANGE MARKET

c. What is the forward premium or discount on buying 30-day Australian dollars against yen delivery?

ANSWER. As shown in parts a and b, the ask rate for 30-day forward Australian dollars is ¥78.58 and the spot ask
rate is ¥78.81. Thus, the Australian dollar is selling at a forward discount to the yen. The annualized discount equals
-3.43%, computed as follows:

Forward premium Forward rate Spot rate 360 78.58 - 78.81 360
= x = x = - 3.43%
or discount Spot rate Forward contract 78.81 30
number of days

9. Suppose Air France receives the following indirect quotes in New York: €0.92 - 3 and £0.63 - 4. Given these
quotes, what range of £/ € bid and ask quotes in Paris will permit arbitrage?

ANSWER. Triangular arbitrage can take place in either of two ways: (1) Convert from euros to dollars (at the ask
rate), then from dollars to pounds (at the bid rate), or (2) convert from pounds to dollars (at the ask rate), then from
dollars to euros (at the bid rate). The first quote will give us the bid price for the euro in terms of the pound and the
second quote will yield the ask price. Using the given rates, Air France would end up with the following amounts:

(1) Euros to pounds = €/$ (ask) x $/£ (bid)

= 0.93 x 1/0.63
= € 1.4762/£ or £0.6774/ €

(2) Pounds to euros = £/$ (ask) x $/ € (bid)

0.64 x 1/0.92
= £0.6957/€ or €1.4375/£

The import of the figures in method (1) is that Air France can buy pounds in New York for €1.4762/£, which is the
equivalent of selling euros at a rate of £0.6774/ €. So, if Air France can buy euros in Paris for less than £0.6774/ €
(which is the equivalent of selling pounds for more than €0.6774/£), it can earn an arbitrage profit. Similarly, the
figures in method (2) tell us that Air France can buy euros in New York at a cost of £0.6957/ €. Given this exchange
rate, Air France can earn an arbitrage profit if it can sell these euros for more than £0.6957/FF in Paris. Thus, Air
France can profitably arbitrage between New York and Paris if the bid rate for the euro in Paris is greater than
£0.6957/ € or the ask rate is less than £0.6774/ €.

10. On checking the Telerate screen, you see the following exchange rate and interest rate quotes:

Currency 90-day interest rates annualized Spot rates 90-day forward rates

Dollar 4.99% - 5.03%

Swiss franc 3.14% - 3.19% $0.711 - 22 $0.726 - 32

a. Can you find an arbitrage opportunity?

ANSWER. Yes. There are two possibilities: Borrow dollars and lend in Swiss francs or borrow Swiss francs and lend
in dollars. The profitable arbitrage opportunity lies in the former: Lend Swiss francs financed by borrowing U.S.
dollars.

b. What steps must you take to capitalize on it?

6
 INSTRUCTOR’S MANUAL: MULTINATIONAL FINANCIAL MANAGEMENT, 9TH ED.

ANSWER. Borrow dollars at 1.2575% for 90 days (5.03%/4), convert these dollars into francs at the ask rate of
$0.722, lend the francs at 0.785% for 90 days (3.14%/4), and immediately sell the francs forward for dollars at the
buy rate of $0.726.

c. What is the profit per $1,000,000 arbitraged?

ANSWER. The profit is $1,000,000 x [(1.00785/0.722) x 0.726 - 1.012575] = $858.66.

ADDITIONAL CHAPTER 7 PROBLEMS AND SOLUTIONS

1. Suppose the quote on pounds is $1.624-31.

a. If you converted $10,000 to pounds and then back to dollars, how many dollars would you end up with?

ANSWER. For $10,000, you would buy pounds at the price of $1.631, giving you £6,131.21 ($10,000/1.631) and
resell them at the bid price of $1.624. The latter transaction would yield $9,957.08, resulting in a round-trip cost of
$42.92.

b. Suppose you could buy pounds at the bid rate and sell them at the ask rate. How many dollars would you have
to transact in order to earn $1,000 on a round-trip transaction (buying pounds for dollars and then selling the
pounds for dollars)?

ANSWER. For every pound you could buy at the bid and sell at the ask, you would earn the spread of $0.007. To earn
$1,000, you would have to transact £142,857.14 ($1,000/$0.0007). At the current bid rate of $1.624, this is
equivalent to $232,000 (142,857.14 x $1.624).

2. Using the following data, calculate the 30-day, 90-day, and 180-day forward premiums for the British pound.

Spot: £1 = $1.4487
30-day forward: £1 = $1.4498
90-day forward: £1 = $1.4511
180-day forward: £1 = $1.4529

ANSWER. Here are the relevant calculations for the pound:

The 30-day forward premium is: [($1.4498 - $1.4487)/$1.4487] x 12 = 0.91%

The 90-day forward premium is: [($1.4511 - $1.4487)/$1.4487] x 4 = 0.66%

The 180-day forward premium is: [($1.4529 - $1.4487)/$1.4487] x 2 = 0.58%

The small forward premiums at these maturities indicate that British and U.S. interest rates are very close.

3. The spot and 90-day forward rates for the pound are $1.1376 and $1.1350, respectively. What is the forward
premium or discount on the pound?

ANSWER. The forward premium (discount) on the British pound is

[(f1 - e0)/e0] x (360/n) = [(1.1350 - 1.1376)/1.1376] x 4 = -.91%

which is a forward discount of .91%.

4. Suppose the spot quote on the euro is $0.9302-18, and the spot quote on the Swiss franc is $0.6180-90.

a. Compute the percentage bid-ask spreads on the euro and franc.

7
CHAPTER 7: THE FOREIGN EXCHANGE MARKET

ANSWER. The percentage bid-ask spreads on the euro and franc are calculated as follows:

Euro bid-ask spread = (0.9318 - 0.9302)/0.9318 = 0.17%

SFr bid-ask spread = (0.6190 - 0.6180)/0.6190 = 0.16%

b. What is the direct spot quote for the franc in Frankfurt?

ANSWER. In order to sell one franc for euros, first sell the franc for $0.6180 and then convert $0.6180 into euros at
the ask rate of $0.9318. Thus the bid rate for the franc is 0.6180/0.9318 = €0.6632. Similarly, to acquire one franc,
sell euros for dollars and then sell dollars for francs. Specifically, it costs $0.6190 to buy €1. Because €1 can be
converted into $0.9302, it takes €0.6190/0.9302 = €0.6654 to buy $0.6190. Thus the ask rate for francs is €0.6654.
The bid-ask quote on the franc in Frankfurt is therefore €0.6632-54.

5. Suppose you observe the following direct spot quotations in New York and Toronto, respectively: 0.8000-50
and 1.2500-60. What are the arbitrage profits per $1 million?

ANSWER. Converting the direct quotes in Toronto into indirect quotes yields bid-ask rates for the Canadian dollar in
terms of the U.S. dollar of U.S.$.7962-.8000. Hence, there is no arbitrage opportunity.

6. Assuming no transaction costs, suppose £1 = $2.4110 in New York, $1 = FF 3.997 in Paris, and FF 1 = £0.1088
in London. How could you take profitable advantage of these rates?

ANSWER. Sell pounds in New York for $2.4110 apiece. Sell the dollars in Paris for FF 3.997, and sell the francs in
London for £.1088. This sequence of transactions yields 2.4110 x 3.997 x .1088 pounds or £1.0485 per pound
initially traded.

7. Suppose the euro is quoted at $0.8782-92, while the yen is quoted at $0.001760-69.

a. Given these quotes for the euro and yen, what is the maximum bid-ask spread in the ¥/DM rate for which there
is no arbitrage?

ANSWER. The ¥/ € bid rate based on triangular arbitrage is ¥496.44/€1 (0.8782/0.001769). Similarly, the ¥/€ ask rate
based on triangular arbitrage is ¥499.55/€1 (0.8792/0.001760). Hence, the bid-ask spread based on triangular
arbitrage is ¥499.55 - ¥496.44 = ¥3.11. This spread is the maximum one would expect. Beyond this spread, it would
be profitable to engage in triangular arbitrage.

b. What is the maximum bid-ask spread in percentage terms?

ANSWER. The maximum bid-ask spread in percentage terms equals the maximum spread divided by the bid price or
3.11/496.44 = 0.63%. Relative to the ask price, this percentage is 0.62% (/499.55).

8. Assume that back in 1995 the pound sterling is worth FF 9.80 in Paris and SFr 5.40 in Zurich.

a. Show how British arbitrageurs can make profits given that the Swiss franc is worth two French francs. What
would be the profit per pound transacted?

ANSWER. Sell pounds in Zurich for SFr 5.40. Sell Swiss francs in Zurich for FF2. Then buy pounds in Paris for
FF9.80. This yields (5.40 x 2)/9.8 = £1.102 or a profit of £.102 per pound transacted.

b. What would be the eventual outcome on exchange rates in Paris and Zurich given these arbitrage activities?

ANSWER. The Swiss franc price of the pound would decline in Zurich. The Swiss franc would depreciate relative to
the French franc. The pound would appreciate relative to the French franc in Paris.

8
 INSTRUCTOR’S MANUAL: MULTINATIONAL FINANCIAL MANAGEMENT, 9TH ED.

c. Rework Part a, assuming that transaction costs amount to 0.6% of the amount transacted. What would be the
profit per pound transacted?

ANSWER. Each transaction costs 0.6%. Thus, at each stage the arbitrageur receives 99.4% of what he previously
received. Thus after the three transactions undertaken in part a, the arbitrageur receives 1.102 x (.994) 3 = £1.0823 for
a profit per pound sold equal to £.0823.

d. Suppose the Swiss franc is quoted at FF 2 in Zurich. Given a transaction cost of 0.6% of the amount transacted,
what are the minimum/maximum French franc prices for the Swiss franc that you would expect to see quoted in
Paris?

ANSWER. With a transaction cost of .6%, an arbitrageur will receive 99.4% of what she would receive absent these
costs. To find the maximum and minimum French franc prices for the Swiss franc that would be quoted in Paris, it is
sufficient to invoke the following no-arbitrage conditions:

1. Converting FF1 into Swiss francs in Zurich and then converting the Swiss francs back into French francs in
Paris should yield no more than one FF1.

2. Converting SFr 1 into French francs in Zurich and then converting the French francs back into Swiss francs
in Paris should yield no more than SFr1.

If e is the direct quote for the Swiss franc in Paris, the first no-arbitrage condition says that

0.5 x 0.994 x e x 0.994 < 1

or e < 2.0242

According to the second no-arbitrage condition,

2 x 0.994 x (1/e) x 0.994 < 1

or e > 1.9761

Combining these two inequalities yields the minimum and maximum exchange rates or 1.9761 < e < 2.0242.

9. On checking the Reuters screen, you see the following exchange rate and interest rate quotes:

Currency 90-day interest rates Spot rates 90-day forward rates

Pound 7 7/16 - 5/16% ¥159.9696-9912/£ ¥145.5731-8692/£
Yen 2 3/8 - 1/4%

a. Can you find an arbitrage opportunity?

ANSWER. There are two alternatives: (1) Borrow yen at 2 3/8%/4, convert the yen into pounds at the spot ask rate
of ¥159.9912/£, invest the pounds at 7 5/16%/4. and sell the expected proceeds forward for yen at the forward bid
rate of ¥145.5731/£, or (2) borrow pounds at 7 7/16%/4, convert the pounds into yen at the spot bid rate of
¥159.9696/£, invest the yen at 2 1/4%/4, and sell the proceeds forward for pounds at the forward ask rate of
¥145.8692/£. The first alternative will yield a loss of -¥7.94 per ¥100 borrowed, indicating that this is not a
profitable arbitrage opportunity:

(100/159.9912) x (1.0183) x 145.5731 - 100 x 1.0059 = -7.94

Switching to alternative 2, the return per £100 borrowed is £8.42, indicating that this is a very profitable arbitrage
opportunity:

100 x 159.9696 x 1.0056/145.8692 - 100 x 1.0186 = 8.42

9
CHAPTER 7: THE FOREIGN EXCHANGE MARKET

b. What steps must you take to capitalize on it?

ANSWER. The steps to be taken have already been outlined in the answer to part a.

c. What is the profit per £1,000,000 arbitraged?

ANSWER. Based on the answer to part a, the profit is £84,200 (8.42 x 10,000).

NOTES ON FOREIGN EXCHANGE QUOTES

1. Spot rate - rate at which foreign exchange can be bought or sold for immediate delivery.

€1 = $0.9107
SFr1 = $0.6340

a) Actual rates are given in pairs: a bid (buy) rate and ask (sell) rate

€1 = $0.9107-10
SFr1 = $0.6340-42

b) Cross rates:

€1 = SFr 1.4364 (0.9107/0.6340)

€1 = SFr 1.4360-9 (0.9107/0.6342 - 0.9110/0.6340)

c) Measuring currency changes

Year 2: €1 = $0.9107 or $1 = €1.0981

Year 1: €1 = $0.8163 or $1 = €1.2250

The euro is said to have appreciated against the dollar by

(0.9107 - 0.8163)/0.8163 = 11.56%.

Alternatively, the dollar is said to have depreciated against the euro by (1.0981 - 1.2250)/1.2250 = - 10.37%.

Thursday, January 9, 1986: Cr$1 = $0.00009615 or $1 = Cr$10400

Thursday, January 31, 1985: Cr$1 = $0.0002899 or $1 = Cr$3449.50

The Brazilian cruzeiro has depreciated against the dollar by

(.00009615 - .0002899)/.0002899 = - 66.83%.

Alternatively, the dollar has appreciated against the cruzeiro by

(10400 - 3449.5)/3449.5 = 201.49%.

Note: The new Brazilian currency is now the real. This example dates back to a time when the Brazilian
currency was running a very high rate of inflation and so was continually devaluing

2. Forward rate - rate at which foreign exchange can be bought or sold today for delivery at a fixed future date,
typically in multiples of 30 days, e.g., 30, 60, 90, or 180 days.

a) Forward quotations

10
 INSTRUCTOR’S MANUAL: MULTINATIONAL FINANCIAL MANAGEMENT, 9TH ED.

30 day forward rates

€1 = $0.9120
SFr1 = $0.6338

b) Forward premium (+) or discount (-) (annualized) = [(forward rate - spot rate)/spot rate] x (360/n)
where n is the number of days in the forward contract. Thus, the euro is selling at an annualized forward premium
of 1.71% against the dollar:

[(0.9120 - 0.9107)/0.9107] x 12 = 1.71%.

The Swiss franc is selling at an annualized forward discount of 0.38% against the dollar:

[(0.6338 - 0.6340)/0.1340] x 12 = - 0.38%.

c) Swap rates
Spot rates:
€1 = $0.9107-10
SFr1 = $0.6340-42

30-day forward rates:

€1 = $0.9120-25
SFr1 = $0.6338-41

Expressed as: €1 = $0.9107-10 13-15

SFr1 = $0.6340-42 2-1

d) Cross rates on a 30-day forward contract:

€1 = SFr1.4383-97 (0.9120/0.6341 - 0.9125/0.6338)

11
Another random document with
no related content on Scribd:
 Proclamation of Sept. 22, 1862.

I, Abraham Lincoln, President of the United States of America,

and Commander-in-Chief of the army and navy thereof, do hereby
proclaim and declare that hereafter, as heretofore, the war will be
prosecuted for the object of practically restoring the constitutional
relation between the United States and each of the States and the
people thereof, in which States that relation is or may be suspended
or disturbed.
That it is my purpose, upon the next meeting of Congress, to again
recommend the adoption of a practical measure tendering pecuniary
aid to the free acceptance or rejection of all slave States, so called, the
people thereof may not then be in rebellion against the United
States, and which States may then have voluntarily adopted, or
thereafter may voluntarily adopt, immediate or gradual abolishment
of slavery within their respected limits; and that the effort to colonize
persons of African descent with their consent upon this continent or
elsewhere, with the previously obtained consent of the Governments
existing there, will be continued.
That on the first day of January, in the year of our Lord one
thousand eight hundred and sixty-three, all persons held as slaves
within any State or designated part of a State, the people whereof
shall then be in rebellion against the United States, shall be then,
thenceforward, and forever free; and the Executive Government of
the United States, including the military and naval authority thereof,
will recognize and maintain the freedom of such persons, and will do
no act or acts to repress such persons, or any of them, in any efforts
they may make for their actual freedom.
That the Executive will, on the first day of January aforesaid, by
proclamation, designate the States and parts of States, if any, in
which the people thereof respectively, shall then be in rebellion
against the United States; and the fact that any State, or the people
thereof, shall on that day be, in good faith, represented in the
Congress of the United States by members chosen thereto at
elections wherein a majority of the qualified voters of such State shall
have participated, shall, in the absence of strong countervailing
testimony, be deemed conclusive evidence that such State, and the
people thereof, are not in rebellion against the United States.
That attention is hereby called to an act of Congress entitled “An
act to make an additional article of war,” approved March 13, 1862,
and which act is in the words and figures following:
“Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, That hereafter the
following shall be promulgated as an additional article of war, for the
government of the army of the United States, and shall be obeyed
and observed as such.
“Article —. All officers or persons in the military or naval service
of the United States are prohibited from employing any of the forces
under their respective commands for the purpose of returning
fugitives from service or labor who may have escaped from any
persons to whom such service or labor is claimed to be due, and any
officer who shall be found guilty by a court-martial of violating this
article shall be dismissed from the service.
“Sec. 2. And be it further enacted, That this act shall take effect
from and after its passage.”
Also to the ninth and tenth sections of an act entitled “An act to
suppress insurrection, to punish treason and rebellion, to seize and
confiscate property of rebels, and for other purposes,” approved July
17, 1862, and which sections are in the words and figures following:
“Sec. 9. And be it further enacted, That all slaves of persons who
shall hereafter be engaged in rebellion against the Government of the
United States or who shall in any way give aid or comfort thereto,
escaping from such persons and taking refuge within the lines of the
army; and all slaves captured from such persons or deserted by
them, and coming under the control of the Government of the United
States; and all slaves of such persons found on [or] being within any
place occupied by rebel forces and afterwards occupied by the forces
of the United States, shall be deemed captives of war, and shall be
forever free of their servitude, and not again held as slaves.
 “Sec. 10. And be it further enacted, That no slave escaping into any
State, Territory, or the District of Columbia, from any other State,
shall be delivered up, or in any way impeded or hindered of his
liberty, except for crime, or some offence against the laws, unless the
person claiming said fugitive shall first make oath that the person to
whom the labor or service of such fugitive is alleged to be due is his
lawful owner, and has not borne arms against the United States in
the present rebellion, nor in any way given aid and comfort thereto;
and no person engaged in the military or naval service of the United
States shall, under any pretence whatever, assume to decide on the
validity of the claim of any person to the service or labor of any other
person, or surrender up any such person to the claimant, on pain of
being dismissed from the service.”
And I do hereby enjoin upon and order all persons engaged in the
military and naval service of the United States to observe, obey, and
enforce, within their respective spheres of service, the act and
sections above recited.
And the Executive will in due time recommend that all citizens of
the United States who shall have remained loyal thereto throughout
the rebellion shall (upon the restoration of the constitutional relation
between the United States and their respective States and people, if
that relation shall have been suspended or disturbed) be
compensated for all losses by acts of the United States, including the
loss of slaves.
In witness whereof, I have hereunto set my hand, and caused the
seal of the United States to be affixed.
Done at the city of Washington this twenty-second day of
September, in the year of our Lord one thousand eight hundred and
sixty-two, and of the Independence of the United States the eighty-
seventh.
 ABRAHAM LINCOLN.

By the President:

William H. Seward, Secretary of State.

 Proclamation of January 1, 1863.

Whereas, on the twenty-second day of September, in the year of

our Lord one thousand eight hundred and sixty-two, a proclamation
was issued by the President of the United States, containing among
other things, the following, to wit:
“That on the first day of January, in the year of our Lord one
thousand eight hundred and sixty-three, all persons held as slaves
within any State or designated part of a State, the people whereof
shall then be in rebellion against the United States, shall be then,
thenceforward, and forever, free; and the Executive Government of
the United States, including the military and naval authority thereof,
will recognize and maintain the freedom of such persons, and will do
no act or acts to repress such persons, or any of them, in any efforts
they may make for their actual freedom.
“That the Executive will, on the first day of January aforesaid, by
proclamation, designate the States and parts of States, if any, in
which the people thereof, respectively, shall then be in rebellion
against the United States; and the fact that any State, or the people
thereof, shall on that day be in good faith represented in the
Congress of the United States, by members chosen thereto at
elections wherein a majority of the qualified voters of such States
shall have participated, shall, in the absence of strong countervailing
testimony, be deemed conclusive evidence that such State, and the
people thereof, are then in rebellion against the United States.”
Now, therefore, I, Abraham Lincoln, President of the United
States, by virtue of the power in me vested as Commander-in-Chief
of the Army and Navy of the United States, in time of actual armed
rebellion against the authority and Government of the United States,
and as a fit and necessary war measure for suppressing said
rebellion, do, on this first day of January, in the year of our Lord one
thousand eight hundred and sixty-three, and in accordance with my
purpose so to do, publicly proclaimed for the full period of one
hundred days from the day first above mentioned, order and
designate as the States and parts of States wherein the people
thereof, respectively, are this day in rebellion against the United
States, the following, to wit:
Arkansas, Texas, Louisiana, (except the parishes of St. Bernard,
Plaquemines, Jefferson, St. John, St. Charles, St. James, Ascension,
Assumption, Terre Bonne, Lafourche, St. Mary, St. Martin, and
Orleans, including the city of New Orleans,) Mississippi, Alabama,
Florida, Georgia, South Carolina, North Carolina, and Virginia,
(except the forty-eight counties designated as West Virginia, and also
the counties of Berkeley, Accomac, Northampton, Elizabeth City,
York, Princess Ann, and Norfolk, including the cities of Norfolk and
Portsmouth,) and which excepted parts are for the present left
precisely as if this proclamation were not issued.
And by virtue of the power and for the purpose aforesaid, I do
order and declare that all persons held as slaves within said
designated States and parts of States are, and henceforward shall be,
free; and that the Executive Government of the United States,
including the military and naval authorities thereof, will recognize
and maintain the freedom of said persons.
And I hereby enjoin upon the people so declared to be free to
abstain from all violence, unless in necessary self-defence; and I
recommend to them that, in all cases when allowed, they labor
faithfully for reasonable wages.
And I further declare and make known that such persons, of
suitable condition, will be received into the armed service of the
United States to garrison forts, positions, stations, and other places,
and to man vessels of all sorts in said service.
And upon this act, sincerely believed to be an act of justice,
warranted by the Constitution upon military necessity, I invoke the
considerate judgment of mankind and the gracious favor of Almighty
God.
In witness whereof, I have hereunto set my hand and caused the
seal of the United States to be affixed.
Done at the city of Washington this first day of January, in the year
of our Lord one thousand eight hundred and sixty-three, and of the
independence of the United States of America the eighty-seventh.

Abraham Lincoln.

By the President:
William H. Seward,
Secretary of State.

These proclamations were followed by many attempts on the part

of the Democrats to declare them null and void, but all such were
tabled. The House on the 15th of December, 1862, endorsed the first
by a vote of 78 to 51, almost a strict party vote. Two classed as
Democrats, voted for emancipation—Haight and Noell; seven classed
as Republicans, voted against it—Granger, Harrison, Leary,
Maynard, Benj. F. Thomas, Francis Thomas, and Whaley.
Just previous to the issuance of the first proclamation a meeting of
the Governors of the Northern States had been called to consider
how best their States could aid the general conduct of the war. Some
of them had conferred with the President, and while that meeting
and the date of the emancipation proclamation are the same, it was
publicly denied on the floor of Congress by Mr. Boutwell (June 25,
1864,) that the proclamation was the result of that meeting of the
Governors. That they fully endorsed and knew of it, however, is
shown by the following
 Address of loyal Governors to the President.

Adopted at a meeting of Governors of loyal States, held to take

measures for the more active support of the Government, at
Altoona, Pennsylvania, on the 22d day of September, 1862.
After nearly one year and a half spent in contest with an armed
and gigantic rebellion against the national Government of the United
States, the duty and purpose of the loyal States and people continue,
and must always remain as they were at its origin—namely, to restore
and perpetuate the authority of this Government and the life of the
nation. No matter what consequences are involved in our fidelity,
this work of restoring the Republic, preserving the institutions of
democratic liberty, and justifying the hopes and toils of our fathers
shall not fail to be performed.
And we pledge without hesitation, to the President of the United
States, the most loyal and cordial support, hereafter as heretofore, in
the exercise of the functions of his great office. We recognize in him
the Chief Executive Magistrate of the nation, the Commander-in-
chief of the Army and Navy of the United States, their responsible
and constitutional head, whose rightful authority and power, as well
as the constitutional powers of Congress, must be rigorously and
religiously guarded and preserved, as the condition on which alone
our form of Government and the constitutional rights and liberties of
the people themselves can be saved from the wreck of anarchy or
from the gulf of despotism.
In submission to the laws which may have been or which may be
duly enacted, and to the lawful orders of the President, co-operating
always in our own spheres with the national Government, we mean
to continue in the most vigorous exercise of all our lawful and proper
powers, contending against treason, rebellion, and the public
enemies, and, whether in public life or in private station, supporting
the arms of the Union, until its cause shall conquer, until final
victory shall perch upon its standard, or the rebel foe shall yield a
dutiful, rightful, and unconditional submission.
And, impressed with the conviction that an army of reserve ought,
until the war shall end, to be constantly kept on foot, to be raised,
armed, equipped, and trained at home, and ready for emergencies,
we respectfully ask the President to call for such a force of volunteers
for one year’s service, of not less than one hundred thousand in the
aggregate, the quota of each State to be raised after it shall have filled
its quota of the requisitions already made, both for volunteers and
militia. We believe that this would be a measure of military
prudence, while it would greatly promote the military education of
the people.
We hail with heartfelt gratitude and encouraged hope the
proclamation of the President, issued on the 22d instant, declaring
emancipated from their bondage all persons held to service or labor
as slaves in the rebel States, whose rebellion shall last until the first
day of January now next ensuing. The right of any person to retain
authority to compel any portion of the subjects of the national
Government to rebel against it, or to maintain its enemies, implies in
those who are allowed possession of such authority the right to rebel
themselves; and therefore the right to establish martial law or
military government in a State or territory in rebellion implies the
right and the duty of the Government to liberate the minds of all men
living therein by appropriate proclamations and assurances of
protection, in order that all who are capable, intellectually and
morally, of loyalty and obedience, may not be forced into treason as
the unwilling tools of rebellious traitors. To have continued
indefinitely the most efficient cause, support, and stay of the
rebellion, would have been, in our judgment, unjust to the loyal
people whose treasure and lives are made a willing sacrifice on the
altar of patriotism—would have discriminated against the wife who is
compelled to surrender her husband, against the parent who is to
surrender his child to the hardships of the camp and the perils of
battle, in favor of rebel masters permitted to retain their slaves. It
would have been a final decision alike against humanity, justice, the
rights and dignity of the Government, and against sound and wise
national policy. The decision of the President to strike at the root of
the rebellion will lend new vigor to the efforts and new life and hope
to the hearts of the people. Cordially tendering to the President our
respectful assurance of personal and official confidence, we trust and
believe that the policy now inaugurated will be crowned with success,
will give speedy and triumphant victories over our enemies, and
secure to this nation and this people the blessing and favor of
Almighty God. We believe that the blood of the heroes who have
already fallen, and those who may yet give their lives to their
country, will not have been shed in vain.
The splendid valor of our soldiers, their patient endurance, their
manly patriotism, and their devotion to duty, demand from us and
from all their countrymen the homage of the sincerest gratitude and
the pledge of our constant reinforcement and support. A just regard
for these brave men, whom we have contributed to place in the field,
and for the importance of the duties which may lawfully pertain to us
hereafter, has called us into friendly conference. And now,
presenting to our national Chief Magistrate this conclusion of our
deliberations, we devote ourselves to our country’s service, and we
will surround the President with our constant support, trusting that
the fidelity and zeal of the loyal States and people will always assure
him that he will be constantly maintained in pursuing with the
utmost vigor this war for the preservation of the national life and the
hope of humanity.

A. G. Curtin,
John A. Andrew,
Richard Yates,
Israel Washburne, Jr.,
Edward Solomon,
Samuel J. Kirkwood,
O. P. Morton,
By D. G. Rose, his representative,
Wm. Sprague,
F. H. Peirpoint,
David Tod,
N. S. Berry,
Austin Blair.
 Repeal of the Fugitive Slave Law.

The first fugitive slave law passed was that of February 12th, 1793,
the second and last that of September 18th, 1850. Various efforts had
been made to repeal the latter before the war of the rebellion,
without a prospect of success. The situation was now different. The
war spirit was high, and both Houses of Congress were in the hands
of the Republicans as early as December, 1861, but all of them were
not then ready to vote for repeal, while the Democrats were at first
solidly against it. The bill had passed the Senate in 1850 by 27 yeas to
12 nays; the House by 109 yeas to 76 nays, and yet as late as 1861
such was still the desire of many not to offend the political prejudices
of the Border States and of Democrats whose aid was counted upon
in the war, that sufficient votes could not be had until June, 1864, to
pass the repealing bill. Republican sentiment advanced very slowly in
the early years of the war, when the struggle looked doubtful and
when there was a strong desire to hold for the Union every man and
county not irrevocably against it; when success could be foreseen the
advances were more rapid, but never as rapid as the more radical
leaders desired. The record of Congress in the repeal of the Fugitive
Slave Law will illustrate this political fact, in itself worthy of grave
study by the politician and statesman, and therefore we give it as
compiled by McPherson:—
 [22]
Second Session, Thirty-Seventh Congress.

In Senate, 1861, December 26—Mr. Howe, of Wisconsin,

introduced a bill to repeal the fugitive slave law; which was referred
to the Committee on the Judiciary.
1862, May 24—Mr. Wilson, of Massachusetts, introduced a bill to
amend the fugitive slave law; which was ordered to be printed and lie
on the table.
June 10—Mr. Wilson moved to take up the bill; which was agreed
to—Yeas 25, nays 10, as follows:
Yeas—Messrs. Anthony, Browning, Chandler, Clark, Cowan,
Dixon, Doolittle, Fessenden, Foot, Grimes, Hale, Harlan, Harris,
Howard, Howe, King, Lane of Kansas, Morrill, Pomeroy, Simmons,
Sumner, Ten Eyck, Trumbull, Wade, Wilson, of Massachusetts.—25.
Nays—Messrs. Carlile, Davis, Latham, McDougall, Nesmith,
Powell, Saulsbury, Stark, Willey, Wright—10.[23]
The bill was to secure to claimed fugitives a right to a jury trial in
the district court for the United States for the district in which they
may be, and to require the claimant to prove his loyalty. The bill
repeals sections 6, 7, 8, 9, and 10 of the act of 1850, and that part of
section 5, which authorizes the summoning of the posse comitatus.
When a warrant of return is made either on jury trial or confession of
the party in the presence of counsel, having been warned of his
rights, the fugitive is to be surrendered to the claimant, or the
marshal where necessary, who shall remove him to the boundary line
of the district, and there deliver him to the claimant. The bill was not
further considered.
In House, 1861, December 20—Mr. Julian offered this resolution:
Resolved, That the Judiciary Committee be instructed to report a
bill, so amending the fugitive slave law enacted in 1850 as to forbid
the recapture or return of any fugitive from labor without
satisfactory proof first made that the claimant of such fugitive is loyal
to the Government.
Mr. Holman moved to table the resolution, which was disagreed to
—yeas 39, nays 78, as follows:
Yeas—Messrs. Ancona, Joseph Baily, Biddle, George H. Browne,
Cobb, Cooper, Cox, Cravens, Crittenden, Dunlap, English, Fouke,
Grider, Harding, Holman, Johnson, Law, Lazear, Leary, Lehman,
Mallory, Morris, Noble, Noell, Norton, Nugen, Odell, Pendleton,
Robinson, Shiel, John B. Steele, William G. Steele, Vallandigham,
Wadsworth, Webster, Chilton A. White, Wickliffe, Woodruff, Wright
—39.
Nays—Messrs. Aldrich, Alley, Arnold, Babbitt, Baker, Baxter,
Beaman, Bingham, Francis P. Blair, Samuel S. Blair, Blake,
Buffinton, Burnham, Chamberlain, Clark, Colfax, Frederick A.
Conkling, Roscoe Conkling, Cutler, Davis, Dawes, Delano, Duell,
Edwards, Eliot, Fessenden, Franchot, Frank, Gooch, Goodwin,
Gurley, Hale, Hanchett, Harrison, Hooper, Hutchins, Julian, William
Kellogg, Lansing, Loomis, Lovejoy, McKnight, McPherson, Marston,
Mitchell, Moorhead, Anson P. Morrill, Justin S. Morrill, Olin, Patton,
Pike, Pomeroy, Porter, John H. Rice, Riddle, Edward H. Rollins,
Sargent, Sedgwick, Shanks. Shellabarger, Sherman, Sloan,
Spaulding, Stevens, Benjamin F. Thomas, Train, Vandever, Wall,
Wallace, Walton, Washburne, Wheeler, Whaley, Albert S. White,
Wilson, Windom, Worcester—78.
The resolution was then adopted—yeas 78, nays 39.
1862, June 9—Mr. Julian, of Indiana, introduced into the House a
resolution instructing the Judiciary Committee to report a bill for the
purpose of repealing the fugitive slave law; which was tabled—yeas
66, nays 51, as follows:
Yeas—Messrs. William J. Allen, Ancona, Baily, Biddle, Francis P.
Blair, Jacob B. Blair, George H. Browne, William G. Brown,
Burnham, Calvert, Casey, Clements, Cobb, Corning, Crittenden,
Delano, Diven, Granger, Grider, Haight, Hale, Harding, Holman,
Johnson, William Kellogg, Kerrigan, Knapp, Lazear, Low, Maynard,
Menzies, Moorhead, Morris, Noble, Noell, Norton, Odell, Pendleton,
John S. Phelps, Timothy G. Phelps, Porter, Richardson, Robinson,
James S. Rollins, Sargent, Segar, Sheffield, Shiel, Smith, John B.
Steele, William G. Steele, Benjamin F. Thomas, Francis Thomas,
Trimble, Vallandigham, Verree, Vibbard, Voorhees, Wadsworth,
Webster, Chilton A. White, Wickliffe, Wood, Woodruff, Worcester,
Wright—66.
Nays—Messrs. Aldrich, Alley, Baker, Baxter, Beaman, Bingham,
Blake, Buffinton, Chamberlain, Colfax, Frederick A. Conkling, Davis,
Dawes, Edgerton, Edwards, Eliot, Ely, Franchot, Gooch, Goodwin,
Hanchett, Hutchins, Julian, Kelley, Francis W. Kellogg, Lansing,
Lovejoy, McKnight, McPherson, Mitchell, Anson P. Morrill, Pike,
Pomeroy, Potter, Alexander H. Rice, John H. Rice, Riddle, Edward
H. Rollins, Shellabarger, Sloan, Spaulding, Stevens, Train,
Trowbridge, Van Horn, Van Valkenburgh, Wall, Wallace,
Washburne, Albert S. White, Windom—51.
Same day—Mr. Colfax, of Indiana, offered this resolution:
Resolved, That the Committee on the Judiciary be instructed to
report a bill modifying the fugitive slave law so as to require a jury
trial in all cases where the person claimed denies under oath that he
is a slave, and also requiring any claimant under such act to prove
that he has been loyal to the Government during the present
rebellion.
Which was agreed to—yeas 77, nays 43, as follows:
Yeas—Messrs. Aldrich, Alley, Arnold, Ashley, Babbitt, Baker,
Baxter, Beaman, Bingham, Francis P. Blair, Blake, Buffinton,
Burnham, Chamberlain, Colfax, Frederick A. Conkling, Davis,
Dawes, Delano, Diven, Edgerton, Edwards, Eliot, Ely, Franchot,
Gooch, Goodwin, Granger, Gurley, Haight, Hale, Hanchett,
Hutchins, Julian, Kelley, Francis W. Kellogg, William Kellogg,
Lansing, Loomis, Lovejoy, Lowe, McKnight, McPherson, Mitchell,
Anson P. Morrill, Justin S. Morrill, Nixon, Timothy G. Phelps, Pike,
Pomeroy, Porter, Potter, Alexander H. Rice, John H. Rice, Riddle,
Edward H. Rollins, Sargent, Shanks, Sheffield, Shellabarger, Sloan,
Spaulding, Stevens, Stratton, Benjamin F. Thomas, Train, Trimble,
Trowbridge, Van Valkenburgh, Verree, Wall, Wallace, Washburne,
Albert, S. White, Wilson, Windom, Worcester—77.
Nays—Messrs. William J. Allen, Ancona, Baily, Biddle, Jacob B.
Blair, William G. Brown, Calvert, Casey, Clements, Cobb, Corning,
Crittenden, Fouke, Grider, Harding, Holman, Johnson, Knapp,
Maynard, Menzies, Noble, Noell, Norton, Pendleton, John S. Phelps,
Richardson, Robinson, James S. Rollins, Segar, Shiel, Smith, John B.
Steele, William G. Steele, Francis Thomas, Vallandigham, Vibbard,
Voorhees, Wadsworth, Webster, Chilton A. White, Wickliffe, Wood,
Wright—43.
 Third Session, Thirty-Seventh Congress.

In Senate, 1863, February 11—Mr. Ten Eyck, from the Committee

on the Judiciary, to whom was referred a bill, introduced by Senator
Howe, in second session, December 26, 1861, to repeal the fugitive
slave act of 1850, reported it back without amendment, and with a
recommendation that it do not pass.
 First Session, Thirty-Eighth Congress.

In House, 1863, Dec. 14.—Mr. Julian, of Indiana, offered this

resolution:
Resolved, That the Committee on the Judiciary be instructed to
report a bill for a repeal of the third and fourth sections of the “act
respecting fugitives from justice and persons escaping from the
service of their masters,” approved February 12, 1793, and the act to
amend and supplementary to the aforesaid act, approved September
18, 1850.
Mr. Holman moved that the resolution lie upon the table, which
was agreed to—yeas 81, nays 73, as follows:
Yeas—Messrs. James C. Allen, William J. Allen, Ancona,
Anderson, Baily, Augustus C. Baldwin, Jacob B. Blair, Bliss, Brooks,
James S. Brown, William G. Browne, Clay, Cobb, Coffroth, Cox,
Cravens, Creswell, Dawson, Demming, Denison, Eden, Edgerton,
Eldridge, English, Finck, Ganson, Grider, Griswold, Hall, Harding,
Harrington, Benjamin G. Harris, Charles M. Harris, Higby,
Holman, Hutchins, William Johnson, Kernan, King, Knapp, Law,
Lazear, Le Blond, Long, Mallory, Marcy, Marvin, McBride,
McDowell, McKinney, William H. Miller, James R. Morris,
Morrison, Nelson, Noble, Odell, John O’Neil, Pendleton, William H.
Randall, Robinson, Rogers, James S. Rollins, Ross, Scott, Smith,
Smithers, Stebbins, John B. Steele, Stuart, Sweat, Thomas,
Voorhees, Wadsworth, Ward, Wheeler, Chilton A. White, Joseph W.
White, Williams, Winfield, Fernando Wood, Yeaman—81.
Nays—Messrs. Alley, Allison, Ames, Arnold, Ashley, John D.
Baldwin, Baxter, Beaman, Blaine, Blow, Boutwell, Boyd, Brandegee,
Broomall, Ambrose W. Clark, Freeman Clark, Cole, Henry Winter
Davis, Dawes, Dixon, Donnelly, Driggs, Dumont, Eckley, Eliot,
Farnsworth, Fenton, Frank, Garfield, Gooch, Grinnell, Hooper,
Hotchkiss, Asahel W. Hubbard, John H. Hubbard, Hulburd, Jenckes,
Julian, Francis W. Kellogg, Orlando Kellogg, Loan, Longyear,
Lovejoy, McClurg, McIndoe, Samuel F. Miller, Moorhead, Morrill,
Amos Myers, Leonard Myers, Norton, Charles O’Neill, Orth,
Patterson, Pike, Pomeroy, Price, Alexander H. Rice, John H. Rice,
Edward H. Rollins, Schenck, Scofield, Shannon, Spalding, Thayer,
Van Valkenburgh, Elihu B. Washburne, William B. Washburn,
Whaley, Wilder, Wilson, Windom, Woodbidge—73.
1864, June 6, Mr. Hubbard, of Connecticut, offered this resolution:
Resolved, That the Committee on the Judiciary be instructed to
report to this House a bill for the repeal of all acts and parts of acts
which provide for the rendition of fugitive slaves, and that they have
leave to make such report at any time.
Which went over under the rule. May 30, he had made an
ineffectual effort to offer it, Mr. Holman objecting.

REPEALING BILLS.

1864, April 19, the Senate considered the bill to repeal all acts for
the rendition of fugitives from service or labor. The bill was taken up
—yeas 26, nays 10.
Mr. Sherman moved to amend by inserting these words at the end
of the bill:
Except the act approved February 12, 1793, entitled “An act
respecting fugitives from justice, and persons escaping from the
service of their masters.”
Which was agreed to—yeas 24, nays 17, as follows:
Yeas—Messrs. Buckalew, Carlile, Collamer, Cowan, Davis, Dixon,
Doolittle, Foster, Harris, Henderson, Hendricks, Howe, Johnson,
Lane of Indiana, McDougall, Nesmith, Powell, Riddle, Saulsbury,
Sherman, Ten Eyck, Trumbull, Van Winkle, Willey—24.
Nays—Messrs. Anthony, Brown, Clark, Conness, Fessenden,
Grimes, Hale, Howard, Lane of Kansas, Morgan, Morrill, Pomeroy,
Ramsey, Sprague, Sumner, Wilkinson, Wilson—17.
Mr. Saulsbury moved to add these sections:
 And be it further enacted, That no white inhabitant of the United
States shall be arrested, or imprisoned, or held to answer for a
capital or otherwise infamous crime, except in cases arising in the
land or naval forces, or in the militia when in actual service in time of
war or public danger, without due process of law.
And be it further enacted, That no person engaged in the
executive, legislative, or judicial departments of the Government of
the United States, or holding any office or trust recognized in the
Constitution of the United States, and no person in military or naval
service of the United States, shall, without due process of law, arrest
or imprison any white inhabitant of the United States who is not, or
has not been, or shall not at the time of such arrest or imprisonment
be, engaged in levying war against the United States, or in adhering
to the enemies of the United States, giving them aid and comfort, nor
aid, abet, procure or advise the same, except in cases arising in the
land or naval forces, or in the militia when in actual service in time of
war or public danger. And any person as aforesaid so arresting, or
imprisoning, or holding, as aforesaid, as in this and the second
section of this act mentioned, or aiding, abetting, or procuring, or
advising the same, shall be deemed guilty of felony, and, upon
conviction thereof in any court of competent jurisdiction, shall be
imprisoned for a term of not less than one nor more than five years,
shall pay a fine of not less than $1,000 nor more than $5000, and
shall be forever incapable of holding any office or public trust under
the Government of the United States.
Mr. Hale moved to strike out the word “white” wherever it occurs;
which was agreed to.
The amendment of Mr. Saulsbury, as amended, was then
disagreed to—yeas 9, nays 27, as follows:
Yeas—Messrs. Buckalew, Carlile, Cowan, Davis, Hendricks,
McDougall, Powell, Riddle, Saulsbury—9.
Nays—Messrs. Anthony, Clark, Collamer, Conness, Doolittle,
Fessenden, Foster, Grimes, Hale, Harris, Howard, Howe, Lane of
Indiana, Lane, of Kansas, Morgan, Morrill, Pomeroy, Ramsey,
Sherman, Sprague, Sumner, Ten Eyck, Trumbull, Van Winkle,
Wilkinson, Willey, Wilson—27.
 Mr. Conness moved to table the bill; which was disagreed to—yeas
9, (Messrs. Buckalew, Carlile, Conness, Davis, Hendricks, Nesmith,
Powell, Riddle, Saulsbury,) nays 31.
It was not again acted upon.
1864, June 13—The House passed this bill, introduced by Mr.
Spalding, of Ohio, and reported from the Committee on the
Judiciary by Mr. Morris, of New York, as follows:
Be it enacted, etc., that sections three and four of an act entitled
“An act respecting fugitives from justice and persons escaping from
the service of their masters,” passed February 12, 1793, and an Act
entitled “An act to amend, and supplementary to, the act entitled ‘An
act respecting fugitives from justice, and persons escaping from their
masters,’ passed February 12, 1793,” passed September 18, 1850, be,
and the same are hereby, repealed.
Yeas 86, nays 60, as follows:
Yeas—Messrs. Alley, Allison, Ames, Arnold, Ashley, John D.
Baldwin, Baxter, Beaman, Blaine, Blair, Blow, Boutwell, Boyd,
Brandegee, Broomall, Ambrose W. Clarke, Freeman Clark, Cobb,
Cole, Creswell, Henry Winter Davis, Thomas T. Daavis, Dawes,
Dixon, Donnelly, Driggs, Eckley, Eliot, Farnsworth, Fenton, Frank,
Garfield, Gooch, Griswold, Higby, Hooper, Hotchkiss, Asahel W.
Hubbard, John K. Hubbard, Hulburd, Ingersoll, Jenckes, Julian,
Kelley, Francis W. Kellogg, O. Kellogg, Littlejohn, Loan, Longyear,
Marvin, McClurg, McIndoe, Samuel F. Miller, Moorhead, Morrill,
Daniel Morris, Amos Myers, Leonard Myers, Norton, Charles O’Neill,
Orth, Patterson, Perham, Pike, Price, Alexander H. Rice, John H.
Rice, Schenck, Scofield, Shannon, Sloan, Spalding, Starr, Stevens,
Thayer, Thomas, Tracy, Upson, Van Valkenburgh, Webster, Whaley,
Williams, Wilder, Wilson, Windom, Woodbridge—86.
Nays—Messrs. James C. Allen, William J. Allen, Ancona,
Augustus C. Baldwin, Bliss, Brooks, James S. Brown, Chanler,
Coffroth, Cox, Cravens, Dawson, Denison, Eden, Edgerton,
Eldridge, English, Finck, Ganson, Grider, Harding, Harrington,
Charles M. Harris, Herrick, Holman, Hutchins, Kalbfleisch, Kernan,
King, Knapp, Law, Lazear, Le Blond, Mallory, Marcy, McDowell,
McKinney, Wm. H. Miller, James R. Morris, Morrison, Odell,
Pendleton, Pruyn, Radford, Robinson, Jas. S. Rollins, Ross,