1. The spot market quotes the exchange rate of the GHS to a CADS as GHS 3.562 while the 90-day forward quotes it at GH3.425. Required: Calculate the annualized forward premium or discount. 2. Suppose bid price for £=GHS6.27, ask price = GHS6.316. Required: Calculate the bid/ask spread.

1. The spot market quotes the exchange rate of the GHS to a CADS as GHS 3.562 while the 90-day forward quotes it at GH3.425. Required: Calculate the annualized forward premium or discount. 2. Suppose bid price for £=GHS6.27, ask price = GHS6.316. Required: Calculate the bid/ask spread.

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter5: Currency Derivatives

Section: Chapter Questions

Problem 28QA

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Concept explainers

Contingent Liabilities and Provisions

A contingent liability can be defined as a liability the occurrence of which is dependent upon the happening of an uncertain future event. It is generally recorded in the books only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly.

Question

1. The spot market quotes the exchange rate of the GHS to a CADS as GHS 3.562 while the 90-day forward quotes it at GH3.425.

Required: Calculate the annualized forward premium or discount.

2. Suppose bid price for £=GHS6.27, ask price = GHS6.316.

Required: Calculate the bid/ask spread.

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