so for the quarter, 1+eurofranc rate/(1+ eurodollar rate) = (1.195/1.115)
** 0.25 (ie raised to the 1/4 power)
so have forward rate of 7.05 * 1.017473857 = 7.173190695.
other estimates are ok such as (1 + .195 / 4.) / (1 + .115/4).
now the discount is 4 * (7.17-7.05) / 7.17 or 0.066945607 ie 6.694%. other
columns similar.
in some cases 7.05 might be used as the denominator in this calculation for
discount. The factor of 4 is for quarters. This seems to be how the cas
wants these solved, but as long as it is an essay question lots of
variations will probably get most of the credit.
Let me know if you disagree.
bill 103650.2434@compuserve.com