1. As a currency trader, you see the following quotes on your computer screen:
                  Spot       1-Month    2-Month    3-Month    6-Month
EUR/USD 1.0435/45    20/25       52/62          75/90       97/115
USD/JPY    98.75/85    12/10       20/16          25/19       45/35
GBP/USD 1.6623/33    30/35       62/75          95/110    120/130
a. What are the outright forward BID and ASK quotes for the USD/EUR at the 2-month maturity?
Outright forward BID: $1.0487/Euro
Outright forward ASK: $1.0507/Euro
Bank buys at spot 1.0435
Bank sells at spot 1.0445
Stated two month bid/ask rate= 52/62 -> 0.0052/0.0062
Outright FB: 1.0435+0.0052=1.0487
Outright FA: 1.0445+0.0062=1.0507
b. Suppose you want to swap out of USD 10,000,000 and into JPY for 3 months. The swap simultaneously buys JPY spot and sells the JPY forward in 3 months’ time. What are the cash flows associated with the swap?
c. If one of your corporate customers calls you and wants to buy pounds with dollars in 6 months, what price would you quote?
Quoted Price: $1.6763
Spot Price=1.6623/33
Spot Bid=1.6623
Spot Ask=1.6633
6 months=120/130 -> 0.0120/00130
=1.6633+0.0130 =1.6763/pound
d. What is the forward premium or discount of the USD/EUR based on the 6-month forward maturity assuming a 360-day year?
e. What is the forward premium or discount of the JPY based on the 1-month forward maturity assuming a 360-day year?
Note: A swap simultaneously combines two foreign exchange transactions with different value dates but in opposite directions.

1. As a currency trader, you see the following quotes on your compu...