Assume you are a price maker. The EUR/USD and USD/JPY spot rates are 1.1495/99 and 112.76/80 respectively. Your 4-month swap rates are 22/24 and 33/30 respectively. Determine your 4-month outright FEC bid rate for EUR/JPY, rounded to 2 decimal places.
Question
Assume you are a price maker. The EUR/USD and USD/JPY spot rates are 1.1495/99 and 112.76/80 respectively. Your 4-month swap rates are 22/24 and 33/30 respectively. Determine your 4-month outright FEC bid rate for EUR/JPY, rounded to 2 decimal places.
Solution
To calculate the 4-month outright FEC bid rate for EUR/JPY, follow these steps:
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First, calculate the 4-month forward rate for EUR/USD and USD/JPY.
For EUR/USD, the spot rate is 1.1495 and the swap rate is 0.0022 (22 pips). So, the 4-month forward rate for EUR/USD is 1.1495 - 0.0022 = 1.1473.
For USD/JPY, the spot rate is 112.76 and the swap rate is 0.33 (33 pips). So, the 4-month forward rate for USD/JPY is 112.76 + 0.33 = 113.09.
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Then, calculate the 4-month outright FEC bid rate for EUR/JPY by dividing the EUR/USD forward rate by the USD/JPY forward rate.
So, the 4-month outright FEC bid rate for EUR/JPY is 1.1473 / 113.09 = 0.01014.
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Finally, round the result to 2 decimal places.
So, the 4-month outright FEC bid rate for EUR/JPY, rounded to 2 decimal places, is 0.01.
Similar Questions
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