TOPIC :Foreign Exchange (FX) Futures pricing
Assume that (1) the current U.S. dollar spot exchange rates for the British Pound (BP) and Mexican Peso (MP) currencies are $1.30000/BP and $0.05400/MP, respectively. Also, the 180-day U.S. and Mexican Libor interest rates are 1.50000% and 6.70000%, respectively.
(a) Compute the 180-day US/MP futures price.
(b) If the 180-day BP futures price is $1.30585/BP, what is the implied 180-day British Libor rate?
(c) What should be the current BP/MP spot exchange rate (or cross rate)?
(d) What should be the 180-day BP/MP futures price?