Forward discount and premium, arbitrage and currency exchange, and | FIN 575 | Colorado State University–Global Campus


  1. Use information from the table below to calculate the 30-day, 60-day and 180-day discount or premium for the Mexican peso.

    Spot: MXN 1 = $13.3694
    30-day forward: MXN 1 = $13.3488
    90-day forward : MXN 1 = $13.2219
    180-day forward: MXN 1 = $13.1888

  2. Use information from the table below to calculate the 30-day, 60-day and 180-day discount or premium for the euro. 

Spot: Euro 1 = $0.7931
30-day forward : Euro 1 = $0.7942
90-day forward: Euro 1 = $0.7943
180-day forward Euro 1 = $0.7948

    3.  Assuming there are no transaction costs and supposing that £1 = $1.563740 in New York, $1 = € 0.796178 in Paris, and €1 = £0.803199 in London, calculate the arbitrage opportunities that exist based on these rates. (Briefly show or explain how you arrived at your solutions to get partial credit if one or more answers are incorrect.)

    4.  Suppose Microsoft Corporation (Microsoft) receives quotes of $0.012524  (bid) and $0.012526 (ask)  for the yen( ¥) and $0.033540 (bid) and $0.033541 (ask) for the Taiwan dollar (NT$).

  1. How many U.S. dollars will Microsoft receive from the sale of ¥60 million?
  2. What is the U.S. dollar cost to Microsoft if it buys ¥1.2 billion?
  3. How many NT$ will Microsoft receive for U.S. $700, 000?
  4. How many yen will Microsoft receive for NT$400 million?
  5. What is the yen cost to Microsoft of buying NT$82 million?

     5.  In a 2-3 page document, discuss reasons that MNCs list their shares on foreign capital markets.

Your answers must be presented in a Word document; if you do any calculations in Excel, copy and paste them from Excel into the Word document.  Make sure your responses are clearly marked so your instructor knows which questions your responses are answering.  Written comments must be formatted in conformity with CSU-Global Guide to Writing and APA Requirements (Links to an external site.). This assignment should amount to 2-3 pages of text in addition to your responses for questions 1-4.

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