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The following market data relate to USD and Yen rates: Spot USD/YEN 116.00 3 months...

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The following market data relate to USD and Yen rates: Spot USD/YEN 116.00 3 months dollar deposit rate 4.5% 6 months dollar deposit rate 5% 3 months yen deposit rate 0.25% 6 months yen deposit rate 0.25% FRA rate for yen is nil A What is a forward rate agreement? (2 marks) B What would be the 6 month USD/Yen forward rate? (3 marks) C What should be the 3 month USD FRA rate 3 months forward? ( 3 marks) D The 6 and 12 month USD libors are 5% and 6.5% respectively. What should you bank do if another bank is quoting 6/12 USD FRA at 6.56.75% ? (5 marks) The following market data relate to USD and Yen rates: Spot USD/YEN 116.00 3 months dollar deposit rate 4.5% 6 months dollar deposit rate 5% 3 months yen deposit rate 0.25% 6 months yen deposit rate 0.25% FRA rate for yen is nil A What is a forward rate agreement? (2 marks) B What would be the 6 month USD/Yen forward rate? (3 marks) C What should be the 3 month USD FRA rate 3 months forward? ( 3 marks) D The 6 and 12 month USD libors are 5% and 6.5% respectively. What should you bank do if another bank is quoting 6/12 USD FRA at 6.56.75%

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