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FOreign exchange market
Date Submitted: 08/16/2004 07:01:00
Category: / Business & Economy / Global Economy
Length: 22 pages (5926 words)
Category: / Business & Economy / Global Economy
Length: 22 pages (5926 words)
The Foreign Exchange Market
Concepts
1.<Tab/>Value Date:
The settlement of a transaction takes place by transfers of deposits between two parties. The day on which these transfers are effected is called the Settlement Date or the Value Date.
2.<Tab/>Spot Rate:
When the exchange of currencies takes place on the second working day after the date of the deal, it is called spot rate.
3.<…
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…rates.
Ans. While observing the forward quotations, it is clear that the US dollar is at discount in the forward market since the points corresponding to the bid price are higher than those corresponding to the ask price. Therefore, the forward points will be subtracted form the spot rate figure. Thus, the outright rates are:
<Tab/> DEM/$ spot - 1.5880/ 90
1 - month forward - 1.5870/ 85
2 - month forward - 1.5860/ 80
3 - month forward - 1.5850/ 75
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