Andreas Broszio (Geneva). Andreas Broszio just started as an analyst for Credit Suisse in Geneva,...
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Andreas Broszio (Geneva). Andreas Broszio just started as an analyst for Credit Suisse in Geneva, Switzerland. He receives the following quotes for Swiss francs against the dollar for spot, 1 month forward, 3 months forward, and 6 months forward.
Spot exchange rate:
Bid rate
SF1.2599/$
Ask rate
SF1.2622/$
1-month forward
10
to 15
3-months forward
14
to 22
6-months forward
20
to 30
The current one-year U.S. T-Bill rate is
4.3%.
a. Calculate outright quotes for bid and ask and the number of points spread between each.
Bid
Ask
Spread
One-month forward (SF/$)
3-months forward (SF/$)
6-months forward (SF/$)
b. What do you notice about the spread as quotes evolve from spot toward 6 months?
c. What is the 6-month Swiss bill rate?
Six-month Swiss bill rate
Spot rate, midrate (SF/$)
Six-month forward rate, midrate (SF/$)
Maturity (days)
Six-month U.S. dollar treasury rate (yield)
%
Implied SF interest rate
%
Answer & Explanation
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