Problem
Answer the followings regarding foreign exchange market
a) Pennsylvania Energy Inc. needs to buy 1,000,000 euro to pay its French energy supplier. Its banker quotes bid-ask rates of €1.3990-1.4000/$. Convert the rates to $/€ in both bid and ask terms. Calculate the dollar cost of this €1,000,000?
b) CIMB Bank quotes a spot rate of RM4.1500/$ and 6-month forward rate of RM4.2500. Examine whether ringgit is trading at discount or premium against dollar in the forward market. What does this discount or premium infer about the value of ringgit in the future in relation to the dollar?