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![Capital Markets Overview
Markets – A place where exchange of goods and services happen
Capital Market
•Place where capital (fund) requirements of the issuers are
met; i.e. Issuers (Corporate, Government, etc) raise funds
•Trades in these markets are for debt, equity securities or
other instruments
•Organized, as they are governed by regulatory bodies
[Securities & Exchange Board of India, RBI]
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![Products: Derivatives
FX Option
Big company now have the right to use [exercise] this trade for settlement on March 7th
What are the key dates?
The FX Option Expiry Date:
Buyer: Big Company
Date that Big Company have to decide whether to exercise the Option
Seller: JPMorgan
Delivery Date:
FX Option Details Date that transfer of funds would occur if Big Company Ltd
exercise this Option
Call: GBP: 1,000,000
Put: USD: 1,500,000
Strike Price 1.5 Other FX Option Components
Expiry Date 5th March 2004
Delivery date 7th March 2004 Call:
Currency that the buyer of the Option would receive
Premium: $5000 Put:
Currency that the buyer of the Option would sell
Strike:
Exchange Rate that would be used if Option is exercised
Page 45-49 in Workbook
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![Products: Derivatives
FX Option
How do Big company know whether to exercise the Option?
On 5th March
The FX Option
Buyer: Big Company
Seller: JPMorgan • Look at current FX [Spot] rate
FX Option Details
Call: GBP: 1,000,000 • If they used the spot rate (Not the Option Strike rate)
Put: USD: 1,500,000 how much would it cost to buy the £1,000,000?
Strike Price 1.5
Expiry Date 5th March 2004
• Would it be cheaper to use the Spot rate and let the
Delivery date 7th March 2004
Option expire or…
Premium: $5000
• Use the Option because the spot price in market would
cost more in USD.
Lets look at possible choices Big Company Could make
Page 45-49 in Workbook
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Banking presentation
Here is a conceptual example of how a bond trade works: 1. Big Company Ltd wants to acquire Small Company Inc for $1,000,000 but needs to raise capital to do so. 2. Big Company Ltd issues bonds to investors, effectively borrowing $1,000,000. 3. Investors purchase the bonds, providing Big Company Ltd with the $1,000,000 needed for the acquisition. 4. Big Company Ltd now owns Small Company Inc. 5. Big Company Ltd makes regular coupon payments to investors over the 10 year term of the bond. At maturity, Big Company Ltd repays the $1,000,000 principal amount to the investors. In this way
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- 1. Objectives At theend of the session you will be able to •Explain general banking operation •Demonstrate general understanding on IB products • Foreign Exchange • Securities • Commodities • Derivatives 1
- 2. Why do Banksexist? • To Provide Financial products and Services 2
- 3. W are clients ho Banks Deutsche Bank Citibank ABN Amro Corporate Deutsche Asset Management Fund Managers Multinational Small / Mid size firms Individuals High Street Banking (Chase Bank) US Only High Net Worth Individuals (Millionaires / Billionaires) 3
- 4. Banking as aWhole One of the world’s leading Major provider of financial services investment banks including corporate finance, cash Commercial management, & credit Banking Investment Services provided: Advice on Comprises of five national business Bank corporate strategy and structure, raising and placing capital, making segments: Middle Market Banking, markets in financial instruments and Mid-Corporate Banking, Commercial offering sophisticated risk Real Estate, Asset Based Lending management services and Commercial Leasing Retail Treasury and Financial Clients Securities Services Services Includes Auto Finance, Global leader in transaction Consumer Banking, Home Finance, Insurance and Small Asset processing and information Business Banking and Card services to wholesale clients wealth Services Three Businesses: Institutional Provides mutual fund, insurance Management Trust Services, Investor & home finance and workplace banking products to consumers Services(WSS) and Treasury and small businesses Services Delivers credit card and other related Provides investment & wealth management payment products to cardholders and services to institutional investors, high net merchant outlets worth individuals & retail customers Aims to be the preferred payment card in Provides personalized advice and solutions to existing customers wallets and to increase wealthy individuals access to new customers 4
- 5. International Banking Locations NorthAmerica Latin America EMEA Asia Pacific 5
- 6. Banking and Bankingoperations Bank is a commercial institution licensed as a receiver of deposits. Banks are mainly concerned with making and receiving payments as well as supplying short-term loans to individuals. Exists to help you make the most of your money Assist you with your monetary requirements and promote savings How do they do it ?? By offering different products and Services Banking Services Deposits Loans Services Capital Market E.g. E.g. Savings DP Current Short Term Long Term Retail Institutional Custodian Fixed E.g. E.g. E.g. E.g. Merchant Banking Overdraft Auto Loan DDs Bank Guarantee Debenture Home Loan Lockers Trustees Trade Bill Pay Finance Fund based activities, greater market risk Fee based activities, lesser market risk 6
- 7. Role of Banks Intermediary role between lenders and borrowers • Lenders – Deposits funds with Banks • Liability products (Liability for Banks) • Borrowers – Borrows funds from Banks • Asset Products (Assets for Banks) 7
- 8. Different types ofBanks Types of Banks Central Bank (RBI) Non Banking Term Financial Commercial Banks Finance Companies Institutions (NBFCs) Public Private Foreign Co- Regional Sector Sector operative Rural State Finance E.g. E.g. E.g. Corporations Indian Financial Banks Banks Institutions (SFCs) SBI HDFC Bank Citibank PNB UTI Bank ABN Amro E.g. BOB ICICI Bank HSBC IFCI NABARD SIDBI State/Central Private Primary Credit Societies 8
- 9. Broad Categories •Retail Banking •WholeSale Banking 9
- 10. Activities of aBank •Accepting deposits from Public •Lending money to public •Remittances/Collection Business •Keeping valuables in safe custody •Government business •Acting as trustee •Treasury services •Capital Market activity 10
- 11. Capital Markets Overview Markets – A place where exchange of goods and services happen Capital Market •Place where capital (fund) requirements of the issuers are met; i.e. Issuers (Corporate, Government, etc) raise funds •Trades in these markets are for debt, equity securities or other instruments •Organized, as they are governed by regulatory bodies [Securities & Exchange Board of India, RBI] 11
- 12.
- 13. Capital Markets intermediaries Regulator Underwriters Merchant Banker / Investment Bank – JPM Brokers Exchanges Custodians Banks Depositories Depositary Participants R & T Agents Market Participants 13
- 14. Capital Markets –Regulators SEBI – Securities Board of India SEC – Securities & Exchange commission (USA) FSA – Financial Services Authority (UK) 14
- 15. Capital Markets intermediaries Underwriter •Who underwrites the issue in case of under-subscription; takes the stock in its books Merchant Banker / Investment Bank •An underwriter or agent for corporations and municipalities issuing securities •Maintain broker/dealer operations mostly, maintain markets for previously issued securities •Offer advisory services to investors •Large role in facilitating mergers and acquisitions, private equity placements and corporate restructuring •Do not accept deposits from and provide loans to individuals (Investment Banks, especially) 15
- 16. Capital Markets intermediaries Brokers •An individual or firm that charges a fee or commission for executing buy and sell orders submitted by an investor. •The role of a firm when it acts as an agent for a customer and charges the customer a commission for its services. Exchanges •A market in which securities, commodities, options, or futures are traded. •Although you will mostly trade stocks through a broker •NSE, BSE, NYSE, NASDAQ, LSE 16
- 17. Capital Markets intermediaries Custodian Anagent, bank, trust company, or other organization which holds and safeguards an individual's, mutual fund's, or investment company's assets for them. Bank An organization, usually a corporation, chartered by a state or federal government, which does most or all of the following: receives demand deposits and time deposits, honors instruments drawn on them, and pays interest on them; discounts notes, makes loans, and invests in securities; collects checks, drafts, and notes; certifies depositor's checks; and issues drafts and cashier's checks. 17
- 18. Capital Markets intermediaries Depositories Aninstitution which facilitates the clearing of securities between the stock exchange & depository participants; holds assets in electronic form on behalf of ultimate beneficiaries Depository Participant Any institution like a bank that maintains the dematerialized accounts of beneficiaries, provides services of settling securities traded on the exchange; Agent of Depository Registrar and Transfer Agents maintain the records of members (shareholders) for the issuer company 18
- 19. Capital Markets intermediaries Market Participants Various persons / entities that indulge in buying & selling Examples: •Qualified Institutional Buyers •Foreign Institutional Investors, Foreign Venture Capital •Domestic Institutional Investors - Banks, Financial Institutions, Insurance Companies, Mutual Funds, Venture Capital •Non - Institutional - High Net worth Clients (E.g. NRI, HUF, Government & Private Corporate bodies) •Retail Individual Investors 19
- 20. Primary and SecondaryCapital Markets Primary Market Sell (float) new stocks and bonds to the public for the first time. In the primary market the security is purchased directly from the issuer Secondary Market Secondary market is where investors trade among themselves. An investor purchases a security from another investor rather than the issuer. Auction market forms a part of this market. 20
- 21. Banking Treasury Products Foreign Exchange • What is an FX trade • How does it work • Why are banks in the in the FX Market 21
- 22. Products: Foreign Exchange Definition:Buying (or selling) of a currency and paying for it with another at an agreed price (exchange rate) for settlement on an agreed date Complete the grid of descriptions using the following words 1. Payment Instructions 2. Receiving / receipt Instructions 3. Currencies 4. 2 Counterparties 5. Broker 6. Value date 7. Booked the right way round 8. Amount 9. Exchange rate 10. Trade Date 22
- 23. Products: Foreign Exchange Component Explanation Currencies Has to be two of these for the exchange to be possible Amount A numerical figure that shows the value of the trade Exchange rate The price of one currency expressed in another The day the trade will settle. i.e. the funds will be debit / credit Value date from / to your account Booked Right Way Round Shows which currency we are paying and receiving. Broker Helps to arrange a trade on behalf of others 2 Counterparties The entities involved in the trade Trade Date The day the deal was agreed Receipt Instructions Where we are receiving our currency to? Payment Instructions Where are we paying the currency to? 23
- 24. Different Trades • Spot trade: Value date = trade date + 2 • Cash trade: value date = trade date • Tom trade: Value date = trade date +1 • Forward trade: Value date = trade date + 3(or more) 24
- 25. Products: Foreign Exchange Example BMW now need to pay in USD but only have a EURO account Gear Box Supplier USA The Solution: Do a Foreign Exchange Trade Supplies Contact Citibank: gear boxes at Want to Buy $5,000,000. agreed Will pay for it in EURO’s. price. BMW JPMorgan will ask what date they want the currency (Value Date) need to pay in JPMorgan will advise the Exchange rate. (How much will $5mio cost in EURO) USD Rate is 1.27 (Euro 1 = $1.27) Pay USD 5,000,000 to BMW (for Gear Box Supplier) BMW Citibank Munich Pay EURO 3,937,008. BMW need to import gearboxes that have been made in the US. Cost $5,000,000 25
- 26. Speculation Example Sell GBP 1 M Microsoft Citibank USA USA Rec $1.9 M sell 1.7M buy Microsoft speculates that GBP price will increase from $1.7 to 1.9 USD GBP1M in 3 months time Contact JPMorgan: Want to Buy GBP 1,000,000. JPMC Will pay for it in JPMorgan will ask what date they want the currency (Value Date) JPMorgan will advise the Exchange rate. (How much will GBP5mio cost in USD) Rate is 1.7 (GBP 1 = $1.7) 26
- 27. Currencies What currencies doyou know? Have a name: Eg United States Dollar, Japanese Yen Have a 3 figure code Eg, USD and JPY 27
- 28. Price of acurrency • Factors that affect the price of a currency -Economic e.g. Interest rate, inflation rate - Political • Strong currency • Weak currency 28
- 29. WHY FX •For personal requirement • For business requirement • For speculation 29
- 30. Products: Commodities Commodities What are Commodities? Commodities Categories Example of a trade 30
- 31. Products: Commodities W areCommodities? hat Review cards and put them into 4 categories Put a name to the 4 categories 31
- 32. Products: Commodities Banks tradein Commodities just as they do in currencies. Commodities are split Into 4 groups: • Energy – e.g. Gas, Oil • Base Metals – e.g. Copper, Aluminium • Precious Metals – e.g. Gold, Silver • Soft Commodities – e.g. Coffee, Sugar, paper 32
- 33. Products: Commodities W Precious metals do banks trade in? hat XAU Gold XAG Silver XPT Platinum XPD Palladium (In place of currency codes the chemical elements of the metal are used to identify the metal) 33
- 34. Products: Commodities Example: Watch maker requires gold to manufacture watches Finds a company selling gold Agrees how much Gold Agree on the price Agree on Delivery Pay $300,000 SWISS Tony’s Gold watch JPMorgan Company Deliver Gold Want to buy 1,000 oz Price is $300 per oz Total Price is $300,000 34
- 35. Products: Commodities Settlement • Use depositories • Allocated • Un allocated 35
- 36. Products: Bonds Bond Trades What is a Bond? How does it work? What role does JPMorgan play? 36
- 37. Our Products: Bonds What is a Bond? A certificate of debt (usually interest-bearing) that is issued by a government or corporation in order to raise money The issuer is required to pay a fixed sum annually until maturity and then a fixed sum to repay the principal Effectively it is a loan. The company who receives the money, issues a Bond with terms and conditions stating when they will pay back interest and principle amount to the lender of the money (Investor) 37
- 38. Products: Bonds Key Termsof a Bond • Face Value Nominal Amount What the Bond is worth when redeemed at maturity • Coupon Amount of interest paid to Bond Holder during the life: (e.g. 5% = 5% of Face Value of investment) Date for coupon payments. Usually 6 monthly (does depend on terms of issuance) • Maturity amount is paid back to the investor. Date the principle • Issuer the Bond. (Received the money) Who Issued Activity: Lets Look at a practical example. 38
- 39. Products: Bonds Conceptual Example Pay $1,000,000 Receives Bond Bond Issuer e.g. A Corporation or Makes regular payments (Coupons) Investor Government Bond maturity pay back $1m 39
- 40. Products: Bonds Conceptual Example Pays $1,000,000 Big Company Ltd Investor(s) Issues Bond(s) to Investors 2. Raising capital: 3. Raising capital: 4.Raising capital: 1. In this example, Big It borrows money An Investor buys the Big Company Ltd Company A looks to by issuing a BOND. bond. (can be a bank, want to buy Small borrow money corporation, Individual Company Inc. etc etc) In order to do so it needs to raise capital. The purchase price is $1,000,000 5. End Result Big Company Ltd can now finance its purchase of Small Company Inc and will pay the Investors back. How much depends on the bond (loan) terms. Small Company Inc 40
- 41. Products: Bonds Conceptual Example Paid $1,000,000 Coupon payments made every 6 months for Big Company Ltd Investor(s) term of bond 10 Year Bond = 20 payments Pay back principle amount (e.g. $1,000,000) at maturity Coupons of 5% are paid semi annually by Big Company to Investors. Investors hold the Bond until Maturity 41
- 42. Products: Bonds Role ofbanks in bonds Example EURO 5 M EURO 5 M BMW JPMorgan Bond BMW JPMorgan Bonds Market Bonds Issue Bonds into the market Want to start BMW Contact design and produce JPMorgan and a new model car appoint them as Lead Manager on Bond Issue Estimate they need Receive Receive Receive EURO 5 million to Bonds Bonds Bonds do this JPMorgan Pay BMW EURO 5 Million and Pay cash Pay cash Pay cash receive Bonds They chose to raise Investors Investors Investors this capital by issuing a Bond Bond Buyer Bond Buyer Bond Buyer 42
- 43. Products: Equities Equity Trades What is an Equity trade? How does it work? What role does JPMorgan play? 43
- 44. Products: Equities Big Companyis now looking to expand its The company decides it It uses a bank to advise how to do this operation again and will raise the cash by needs to raise cash in selling shares order to do this. Will Issue IPO. Big Company Ltd Bank 44
- 45. Products: Equities Bank will: •Assist with company valuation Advertise the IPO • Can under-write shares Potential investors contact • Advise on timing bank and register their interest • Advise on how much of company to sell Bank Investors Big Company Ltd 45
- 46. Products: Equities Secondary Market Investor Investor Investor Stock Investor Exchange Current Share holders (Including Stock Brokers) Investor Investor Investor Investor 46
- 47. Products: Equities Secondary Market Investor Investor Investor Investor Stock Exchange Big Company Ltd (Including Stock Brokers) Investor Investor Investor Investor 47
- 48. Products: Equities How dobanks participate in the Equities market? Client A, wants to They contact JPMorgan buy shares in Big with the details of their JPMorgan trader Company Ltd requirements contacts Stock Exchange. Wants to Buy 500 shares Client A JPMorgan (JPMSL) JPMorgan and Stock Broker agree price and Stock Exchange terms through the Stock Exchange Current Stock Broker Shareholder Through Stock Exchange A price will be JPMorgan will source a agreed seller of the Shares. €20 per share 48
- 49. Products: Equities Activity What are we looking to confirm? Share name Big Company Ltd Number of shares 500 Price of share EURO €20 Buying or Selling Buying Shares Currency paying EURO Trade date 13th October 2005 Value date 15th October 2005 (T +2) Payment details Where to pay shares and cash to (from both parties) 49
- 50. Products: Settling throughclearing house Payments: How do they get made? The trade will then settle across the BNP Kassenverein Central Depository. JPMorgan Frankfurt Delivery versus Payment (DVP) JPMorgan and Client send instructions to Before Payment their Agents. Share A/C EURO Cash a/c Details of the Central Depository trade and when to settle e.g. Kassenverein JPMorgan a/c 500 €10,000 Current Shareholder a/c 500 €10,000 Trades can settle over a central depository After Payment The Shares are now transferred to JPMorgan’s a/c within Kassenverein They will hold shares on behalf of their client Current Citibank Shareholder Frankfurt Original Big Company Share Holder, now has €10,000 50
- 51. Types of Shares • Ordinary Share – These shares give the investor the right to a dividend, if declared. Should the company go into liquidation, then holders of this class of share holds the lowest priority of repayment. • Deferred Ordinary share- These give shareholders additional voting rights or the right to higher dividends. Often these shares will not qualify for dividend until a particular date has been reached or the company profit has reached a pre- determined. • Golden Shares – These shares are designed to allow the shareholders the right to a casting vote. In cases of privatization, the government often held golden shares. This allowed them to have the casting vote if required, as a form of control, during take-over bids or other serious matters. These shares are normally used in UK. • Preference Shares – These shares form part of the share capital of the company. They pay fixed dividend and in the event of liquidation they hold preference 51
- 52. Differences • Bonds VsEquities 52
- 53. Products: Derivatives Derivative Trades What is a Derivative? How does it work? What role does JPMorgan play? 53
- 54. Products: Derivatives Definition A security,such as an Option or Futures contract, whose value depends on the performance of an underlying product. Derivative in itself is not a product, it does however rely on an underlying product for its market value. For this course we will look at 3 derivative examples • Futures • Options • Single Currency Interest Rate Swap 54
- 55. Products: Derivatives Futures What is a Future? How does it work? 55
- 56. Products: Derivatives Futures Definition Standardised exchange-tradedcontract to buy or sell a commodity at an agreed price for settlement or delivery on an agreed future date How does it work 56
- 57. Products: Derivatives Futures UK Potato • Has crop of potatoes UK Potato Farmer Farmer • Ready to sell in 6 months What can happen in the 6 months before the potatoes are ready? • Potato Supplies worldwide except UK could fail • In 5 months time there is a scare about effect of potatoes on health • Supply remains stable with no impact on current prices 57
- 58. Products: Derivatives Futures What canhappen in the 6 months before the potatoes are ready? Risks: Controls: • Crop could fail • Insurance • Price movement • Agree buyer now at agreed price (Future trade) 58
- 59. Products: Derivatives Futures UK Potato Agree to sell Futures Agree to buy UK Potato Exchang Supermarket Farmer Farmer potatoes potatoes Supermarket e Farmer enters into a Futures contract Future Contract Using the Futures Exchange Seller: UK Potato Farmer Finds a buyer for potatoes Buyer: Supermarket Product: Grade A Potatoes Agrees a price Price: £5 / sack Agrees a delivery date Quantity: 5,000 Sacks Delivery: 5th June 2005 Total Price: £25,000 59
- 60. Products: Derivatives Futures June 5th 2005 • Farmer will deliver potatoes to Supermarket through Exchange • Supermarket will pay Farmer through Exchange • Farmer has guaranteed income (providing crop doesn’t fail – insurance would cover this) This agreement means the Farmer has an obligation to deliver potatoes on this date and Supermarket has an obligation to pay farmer the agreed price. All this happens via Exchange 60
- 61. Products: Derivatives Options What is an Option? How does it work? 61
- 62. Products: Derivatives Options Definition The buyer has the right, but not the obligation to buy or sell the underlying product at an agreed price on an agreed date The buyer pays a premium to the seller have this right. Let’s look at an FX Option Page 45-49 in Workbook 62
- 63. Products: Derivatives FX Option Big Company has ordered a Big Company Big Company supply of computer USA What needs to happen USA components from CRUUK (Computer R Us UK) To Pay for this order Big Company will have to do a Foreign Exchange trade. Deliver Have to pay Computer Computer R Us UK will deliver £1,000,000 Components the computer equipment in 3 They need to buy GBP in 3 months months time 1,000,000 (to pay CRUUK) This will cost Big Company Ltd GBP 1,000,000. in 3 months And pay for it with USD Computer RRUs UK Computer Us UK (CRUUK) (CRUUK) Page 45-49 in Workbook 63
- 64. Products: Derivatives FXOption What choices does Big Company Ltd have? • Buy the £’s via a forward FX trade (arrange today value 3 months) • Buy the £’s in 3 months – spot trade (exchange rate unknown until 3 months) • Do an FX Option Page 45-49 in Workbook 64
- 65. Products: Derivatives FXOption Big Company Ltd decide to use an FX Option Why? • Want to know state of cash flows (now and future) • FX Option will limit any exchange rate movements Page 45-49 in Workbook 65
- 66. Products: Derivatives FXOption How does it work? Big Company Bought By The FX Option Big Company Buyer: Big Company (USA) (USA) On January 5th 2004 Seller: JPMorgan FX Option Details Big Company contact JPMorgan Call: GBP: 1,000,000 To have this right but not Put: USD: 1,500,000 obligation Big Company Big Company agree to buy an FX pay JPMorgan a premium Option from JPMorgan. Strike Price 1.5 Expiry Date 5th March 2004 Delivery date 7th March 2004 This Option gives them the right but NOT the obligation to use this trade on the delivery date Premium: $5000 JPMorgan JPMorgan Page 45-49 in Workbook 66
- 67. Products: Derivatives FXOption Big company now have the right to use [exercise] this trade for settlement on March 7th What are the key dates? The FX Option Expiry Date: Buyer: Big Company Date that Big Company have to decide whether to exercise the Option Seller: JPMorgan Delivery Date: FX Option Details Date that transfer of funds would occur if Big Company Ltd exercise this Option Call: GBP: 1,000,000 Put: USD: 1,500,000 Strike Price 1.5 Other FX Option Components Expiry Date 5th March 2004 Delivery date 7th March 2004 Call: Currency that the buyer of the Option would receive Premium: $5000 Put: Currency that the buyer of the Option would sell Strike: Exchange Rate that would be used if Option is exercised Page 45-49 in Workbook 67
- 68. Products: Derivatives FXOption How do Big company know whether to exercise the Option? On 5th March The FX Option Buyer: Big Company Seller: JPMorgan • Look at current FX [Spot] rate FX Option Details Call: GBP: 1,000,000 • If they used the spot rate (Not the Option Strike rate) Put: USD: 1,500,000 how much would it cost to buy the £1,000,000? Strike Price 1.5 Expiry Date 5th March 2004 • Would it be cheaper to use the Spot rate and let the Delivery date 7th March 2004 Option expire or… Premium: $5000 • Use the Option because the spot price in market would cost more in USD. Lets look at possible choices Big Company Could make Page 45-49 in Workbook 68
- 69. Products: Derivatives FXOption To buy £1,000,000 on Spot Market The FX Option 5th March RATE Would Exercise Buyer: Big Company COST in USD Option Seller: JPMorgan If SPOT Rate 1.3 $1,300,000 NO FX Option Details Call: GBP: 1,000,000 If SPOT Rate 1.7 $1,700,000 YES Put: USD: 1,500,000 Strike Price 1.5 Expiry Date 5th March 2004 To Buy £1,000,000. using the FX Option would cost:? Delivery date 7 March 2004 th $1,500,000 Premium: $5000 Remember: Big Company bought the Option 3 months ago So wouldn’t know what the rates would be today. Buying the Option limits the cost of the Computer purchases to a maximum of $1,500,000. (plus the $5000 premium) Page 45-49 in Workbook 69
- 70. Products: Derivatives FX Option: To buy £1,000,000 ‘In’, ‘At’ or ‘Out Of’ the Money? $1,700,000 In the Money Cost in $1,500,000 At the Money USD $1,300,000 Out of the Money 1.3 1.5 1.7 Foreign Exchange Spot Rate Page 45-49 in Workbook 70