If the current exchange rate is $1.65/£, the one-year forward exchange rate is $1.90/£, and the...
If the current exchange rate is $1.65/£, the one-year forward
exchange rate is $1.90/£, and the interest rate on British
government bills is 6% per year, what risk-free dollar-denominated
return can be locked in by investing in the British bills?
(Do not round intermediate calculations. Round your answer
to 2 decimal places.)
Homework Answers
| Future rate=Spot rate*((1+Quoted currency Risk free rate)/(1+Base currency Risk free rate))^time |
| 1.9=1.65*((1+Quoted currency Risk free rate)/(1+0.06))^1 |
| Quoted currency Risk free rate% = 22.06 |
Add Answer to:
If the current exchange rate is $1.65/£, the one-year forward
exchange rate is $1.90/£, and the...
Suppose the interest on Russian government bonds is 7.8%, and the current exchange rate is 27.1...
Suppose the interest on Russian government bonds is 7.8%, and the current exchange rate is 27.1 rubles per dollar. If the forward exchange rate is 27.6 rubles per dollar, and the current U.S. risk-free interest rate is 4.1%, what is the implied credit spread for Russian government bonds? The implied credit spread for Russian government bonds is %. (Round to two decimal places.)
Suppose the one-year forward $7€ exchange rate is $1.9 per euro and the spot exchange rate...
Suppose the one-year forward $7€ exchange rate is $1.9 per euro and the spot exchange rate is $1.6 per euro. What is the forward premium on euros (the forward discount on dollars)? The forward premium on euros is 18.8 percent. (Give your answer as a percentage with one decimal and do not forget a negative sign, if appropriate.) Given the above information, what is the difference between the interest rate on one-year dollar deposits and that on one-year euro deposits...
Suppose the interest on a foreign government bonds is 7.5%, and the current exchange rate is...
Suppose the interest on a foreign government bonds is 7.5%, and the current exchange rate is 28 foreign currencies per dollar. If the forward exchange rate is 28.5 foreign currencies per dollar, and the current US risk-free rate is 4.5%, what is the implied risk premium of the foreign government bond?
Current spot exchange rate $0.60 per £ Forward foreign exchange rate $0.605 per £ Annualized interest...
Current spot exchange rate $0.60 per £ Forward foreign exchange rate $0.605 per £ Annualized interest rate on a 30-day dollar-denominated asset 15% Annualized interest rate on a 30-day pound-denominated asset 7% 1. Does Covered Interest Parity hold? 2. If American investor invested in the U.K. What is the covered interest differential for the investor?
7. The current spot exchange rate is $1.95/£ and the three-month forward rate is $1.90/£. Based...
7. The current spot exchange rate is $1.95/£ and the three-month forward rate is $1.90/£. Based on your analysis of the exchange rate, you are pretty confident that the spot exchange rate will be $1.92/£ in three months. Assume that you would like to buy or sell £1,000,000 a. What actions do you need to take to speculate in the forward market? What is the expected dollar profit from speculation? b. What would be your speculative profit in dollar terms...
current spot exchange rate: $0.0100/yen current 180-day forward exchange rate: $0.0105/yen 180-day U.S. interest rate(on dollar...
current spot exchange rate: $0.0100/yen current 180-day forward exchange rate: $0.0105/yen 180-day U.S. interest rate(on dollar denominated assets): 6.05% 180-day Japanese interest rate(on yen denominated assets): 1.00%
Suppose a US investor wishes to invest in a British firm currently selling for £20 per...
Suppose a US investor wishes to invest in a British firm currently selling for £20 per share. The investor has $13,600 to invest, and the current exchange rate is $2/£. Suppose now the investor also sells forward $6,800 at a forward exchange rate of $1.90/ Calculate the dollar-denominated returns for each scenario. (Round your answers to 2 decimal places. Negative amounts should be indicated by a minus sign.) Price per Share (C) Exchange Rate: Rate of Return (%) at Given...
Assume the spot price of the British pound is currently $1.85. If the risk-free interest rate...
Assume the spot price of the British pound is currently $1.85. If the risk-free interest rate on 1-year government bonds is 5.3% in the United States and 6.2% in the United Kingdom, what must be the forward price of the pound for delivery one year from now? (Do not round intermediate calculations. Round your answer to 3 decimal places.) Forward price
Suppose the Japanese yen exchange rate is ¥78.47 = $1, and the British pound exchange rate...
Suppose the Japanese yen exchange rate is ¥78.47 = $1, and the British pound exchange rate is £1 = $1.57. a. What is the cross-rate in terms of yen per pound? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Do not include the yen sign (¥).) Cross-rate ¥ b. Suppose the cross-rate is ¥125 = £1. What is the arbitrage profit per dollar? (Do not round intermediate calculations and round your answer to...
Suppose the Japanese yen exchange rate is ¥70.47 = $1, and the British pound exchange rate...
Suppose the Japanese yen exchange rate is ¥70.47 = $1, and the British pound exchange rate is £1 = $1.50. a. What is the cross-rate in terms of yen per pound? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Do not include the yen sign (¥).) Cross-rate ¥ b. Suppose the cross-rate is ¥109 = £1. What is the arbitrage profit per dollar? (Do not round intermediate calculations and round your answer to...
Suppose the interest on Russian government bonds is 7.8%, and the current exchange rate is 27.1 rubles per dollar. If the forward exchange rate is 27.6 rubles per dollar, and the current U.S. risk-free interest rate is 4.1%, what is the implied credit spread for Russian government bonds? The implied credit spread for Russian government bonds is %. (Round to two decimal places.)
Suppose the one-year forward $7€ exchange rate is $1.9 per euro and the spot exchange rate is $1.6 per euro. What is the forward premium on euros (the forward discount on dollars)? The forward premium on euros is 18.8 percent. (Give your answer as a percentage with one decimal and do not forget a negative sign, if appropriate.) Given the above information, what is the difference between the interest rate on one-year dollar deposits and that on one-year euro deposits...
7. The current spot exchange rate is $1.95/£ and the three-month forward rate is $1.90/£. Based on your analysis of the exchange rate, you are pretty confident that the spot exchange rate will be $1.92/£ in three months. Assume that you would like to buy or sell £1,000,000 a. What actions do you need to take to speculate in the forward market? What is the expected dollar profit from speculation? b. What would be your speculative profit in dollar terms...
current spot exchange rate: $0.0100/yen current 180-day forward exchange rate: $0.0105/yen 180-day U.S. interest rate(on dollar denominated assets): 6.05% 180-day Japanese interest rate(on yen denominated assets): 1.00%
Suppose a US investor wishes to invest in a British firm currently selling for £20 per share. The investor has $13,600 to invest, and the current exchange rate is $2/£. Suppose now the investor also sells forward $6,800 at a forward exchange rate of $1.90/ Calculate the dollar-denominated returns for each scenario. (Round your answers to 2 decimal places. Negative amounts should be indicated by a minus sign.) Price per Share (C) Exchange Rate: Rate of Return (%) at Given...
Assume the spot price of the British pound is currently $1.85. If the risk-free interest rate on 1-year government bonds is 5.3% in the United States and 6.2% in the United Kingdom, what must be the forward price of the pound for delivery one year from now? (Do not round intermediate calculations. Round your answer to 3 decimal places.) Forward price
Most questions answered within 3 hours.
-
Show the truth table of the
gates needed to control the PISO internal FF, has a...
asked 2 minutes ago -
If X ~ N(50; 100); Determine the value of '' k '' for both
situation:
a)...
asked 20 minutes ago -
In paired t-test, what's the difference between using pooled
variance and using the standard deviation of...
asked 21 minutes ago -
What are the major ethical theories, and how do they apply to
the role of a...
asked 21 minutes ago -
''Driving the call for multilateralism in trade at the summit
was Chinese President Xi Jinping, whose...
asked 15 minutes ago -
Present one method for changing health behavior that you think is
particularly effective.
Describe how one...
asked 23 minutes ago -
Is Goldicks negligent conduct committed within the
scope of his employment for Lapp Roofing liable
asked 36 minutes ago -
What are the effects of IMC-based PID controller and
Zeigler-Nicholas parameters on the specifications of a...
asked 41 minutes ago -
1. Explain the tem (10) Key Success Factors in Contemporary
Selling
asked 54 minutes ago -
It's absolutely linked, the effectiveness of the CP Coordinator
and the success of the business impact...
asked 1 hour ago -
where does leadership reside in belief theory
asked 1 hour ago -
Jane wants to purchase a bond with a face value of $8,595 and a
bond rate...
asked 1 hour ago