A Bank Has Been Asked to Provide a Three-Month Forward

question 35

Multiple Choice

A bank has been asked to provide a three-month forward EUR/USD 'buy' quote for a corporate client.The following information is available to the FX dealer at the bank:
$$\begin{array} { | l | l | l | } \hline & { \text { Bid } } &{ \text { Offer } } \\\hline \text { Spot EURUSD } & 1.0770 & 1.0782 \\\hline \text { 3-month US interest rate } & 3.75 \% \text { p.a. } & 3.85 \% \text { p.a. } \\\hline \text { 3-month euro interest rate } & 2.65 \% \text { p.a. } & 2.75 \% \text { p.a. } \\\hline\end{array}$$
Calculate the bid and ask a three-month forward rate.

• A) EUR/USD 1.0796-1.0781
• B) EUR/USD 1.0797-1.0782
• C) EUR/USD 1.0738-1.0755
• D) EUR/USD 1.0743-1.0750

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Definitions:

Best Chance

The most favorable or advantageous opportunity or possibility to achieve success or a desired outcome.

Job Opportunity

An available position of employment where an individual has the chance to apply for work that matches their skills and interests.

Approaching

The act of coming near or closer to something or someone in physical space or time.

Milgram Study

A psychological experiment conducted by Stanley Milgram which measured the willingness of study participants to obey an authority figure who instructed them to perform acts conflicting with their personal conscience.