Answers to the Chapter Exercises
CHAPTER 2 Markets Exercises
1. If you need to purchase 2,000 ounces of platinum, you can buy it where the marketmaker is willing to sell it—at USD 976 per ounce.
You would respond to the market quote with, “I would like to buy 2,000 ounces of platinum at a spot price of USD 976 please,” or, more simply, “Mine, 2,000 (ounces) at 976.”
In two business days, you will wire USD 1,952,000 to the dealer and receive delivery (in whatever manner has been arranged for this) of 2,000 ounces of platinum.
2. A marketmaker in spot platinum would want to know (among other things): last trade price, market direction (based on fundamental analysis and/or technical analysis), their position, order flow, news coming out, and other relevant information that might move the spot price of platinum.
CHAPTER 3 Interest Rate Exercises
1. The interest on USD 10,000,000 for 3 months (90 days) at r = 4.80% (where this is a simple actual/360 rate):
USD 10,000,000 × (.0480) × (90/360) = USD 120,000
2. The Euros you would receive if you deposited 40 million Euros for 12 years at a quarterly compounded rate of r = 6.00% (treating each quarter as exactly ¼ of a year):
which should make sense if you know the Rule of 72, which says your money should approximately double when the time frame, t (here, 12 years), and the interest rate, r (here, 6.00%), if multiplied together, gives ...
Get Foreign Exchange: A Practical Guide to the FX Markets now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
