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Hello
I don’t understand how the answer for the forward rate for the dollars is the same as buying pounds. The net is that $110000 is owed to MJY in the UK, therefore according to your lecture the deal is buy pounds use the second rate, buy $ use the first or whichever makes the bank better off. The answer in the answer sheet appears to show the opposite for dollars and Euros. We are receiving $ so must sell $ and buy pounds and we are paying Euros so must buy Euros and sell pounds.
Thanks
The $’s are payment not receipts. They are paying a net $110,000 and therefore need to buy dollars.
The Euros are net receipts – they are receiving a net 97,000 euros and are therefore selling euros.
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