If the 60-day interest rates (simple, p.a.) are 3% at home (usd) and 4% abroad (eur) and the spot rate moves from 1.000 to 1.001. (a) What is the return differential, and what is the corresponding prediction of the change in the forward rate? (b) What is the actual change in the forward rate? (c) What is the predicted change in the swap rate computed from the return differential? (d) What is the actual change in the swap rate?
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Q5 If the 60-day interest rates (simple, p.a.) are 3% at home (usd) and 4% abroad (eur) and the spot rate moves from 1.000 to 1.001.
(a) What is the return differential, and what is the corresponding prediction of the change in the forward rate?
(b) What is the actual change in the forward rate?
(c) What is the predicted change in the swap rate computed from the return differential?
(d) What is the actual change in the swap rate?
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