5 points) If the forward rate is an unbiased predictor of future spot rates (i.e., forward...
5 points) If the forward rate is an unbiased predictor of future spot rates (i.e., forward market efficiency holds), then the future spot rate will always be equal to the current forward rate. a. true b. false
Homework Answers
If forward market is efficient and thus is unbiased predictor of future spot rates, then future spot rate will always be equal to the current forward rate
Therefore above statement is true.
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5 points) If the forward rate is an unbiased predictor of future
spot rates (i.e., forward...
All interest and inflation rates are stated as annual rates. Unbiased forward rate (forward expectation parity)...
All interest and inflation rates are stated as annual rates. Unbiased forward rate (forward expectation parity) 1. If the spot market exchange rate for the euro is 1.1427 and the 6-month forward quote is 178, what is the expected exchange rate for the euro in six months? 2. If the spot market exchange rate for the Hong Kong dollar is 7.8461 and the 1-year forward quote is -616, what is the expected exchange rate for the Hong Kong dollar in...
Do you agree with the following statements? Please provide reasons to support your answer. “Covered interest...
Do you agree with the following statements? Please provide reasons to support your answer. “Covered interest parity is forced by arbitrage, which is not the case for uncovered interest rate parity. If the forward rate is equal to the expected future spot rate, we say that the forward rate is an unbiased predictor of the future spot rate: F = E(S1). In this special case, given that covered interest parity holds, uncovered interest parity would also hold (and vice versa)....
Suppose the spot rate and the 1-year forward rates for the euro are €0.88/$ and €0.95/$...
Suppose the spot rate and the 1-year forward rates for the euro are €0.88/$ and €0.95/$ (i.e. 0.95 euros per dollar). (2 points) Is the euro expected to get stronger or weaker? Why? (3 points) What would you estimate is the difference between inflation rates in the US and Europe (i.e., inflation(US) – inflation(Europe))?
Forward rates you have the following assumptions and spot rates - solve for the implied forward...
Forward rates you have the following assumptions and spot rates - solve for the implied forward rates 0.680% 1.120% 1.210% One-year rate Two-year rate five-year rate Implied forward 5 year rates ??? Forward rates you have the following assumpitons and spot rates - solve for the implied forward rates One-year rate Two-year rate ??? 0.680% 0.860% Implied forward 1 year rate.fi in one year Forward rates you have the following assumptions and spot rates - solve for the implied forward...
You are given the following spot rates. Determine the 1 year forward rates at the beginning...
You are given the following spot rates. Determine the 1 year forward rates at the beginning of year 0 through 7. Use annual compounding. Consider the formula 8 8 (1+yo, Show that it holds for your forward rates, and explain in a sentence why it must be true 1(1+y:-1, i=1 Year n Rate yo,n 0.024 0.0245 0.026 0.027 O voo + w N - 0.0275 0.0275 0.028 0.029
When using forward contracts, is the current spot rate between the two currencies relevant? Is the future, actual spot r...
When using forward contracts, is the current spot rate between the two currencies relevant? Is the future, actual spot rate (when the forward contract matures) between the two currencies relevant?
CH:17: 3. Trading in foreign exchange A: What are spot rates and forward rates? Lost Pigeon...
CH:17: 3. Trading in foreign exchange A: What are spot rates and forward rates? Lost Pigeon Aviation, a U.S. company, produces and exports industrial machinery overseas. It recently made a sale to a Japanese manufacturing firm for ¥625 million, but the Japanese firm has 60 days before it must make the payment to Lost Pigeon Aviation The spot exchange rate is ¥130.11 per dollar, and the 60-day forward rate is ¥133.78 per dollar. Is the yen selling at a premium...
Pound: Spot and Forward Mid Rates Bid Ask 14484 14481 14487 Yen: Spot and Forward 15)...
Pound: Spot and Forward Mid Rates Bid Ask 14484 14481 14487 Yen: Spot and Forward 15) Mid Rates Bid Ask Spot 129.87 129.82 129.92 Forward Rates 1 month 129.68 -20 -18 6 months 128.53 -136 -132 Swaps 2 year 117.65 1232 1212 3 year 115.50 1452 1422 1.4459 1.4327 -24 -154 -160 1.4250 1.4225 -238 -265 -230 -253 Refer to the above Table. The current spot rate of dollars per pound as quoted in a newspaper is A £1.4484/$: $0.6904/£...
Suppose that we observe the following spot rates, i.e. the yield curve is upward sloping. The...
Suppose that we observe the following spot rates, i.e. the yield curve is upward sloping. The spot rates are annual rates that are semi-annually compounded. Time to Maturity Spot Rate 0.5 2.00% 1.0 2.50% 1.5 3.00% 2.0 3.50% 1. Compute the six-month forward curve, i.e. compute f(0,0.5,1.0), f(0,1.0,1.5), f(0,1.5,2.0). 2. What can we say about the forward curve? When the term structure of interest rates is upward sloping, the forward curve is __________ (upward/downward) sloping.
Unbiased Expectations Theory Suppose that the current one-year rate (one-year spot rate) and expected one-year T-bill...
Unbiased Expectations Theory Suppose that the current one-year rate (one-year spot rate) and expected one-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows: 1R1=6.95%, E(2r1) =7.45%, E(3r1) =8.45% E(4r1)=8.95% Using the unbiased expectations theory, what is the current (long-term) rate for four-year-maturity Treasury securities?
Forward rates you have the following assumptions and spot rates - solve for the implied forward rates 0.680% 1.120% 1.210% One-year rate Two-year rate five-year rate Implied forward 5 year rates ??? Forward rates you have the following assumpitons and spot rates - solve for the implied forward rates One-year rate Two-year rate ??? 0.680% 0.860% Implied forward 1 year rate.fi in one year Forward rates you have the following assumptions and spot rates - solve for the implied forward...
You are given the following spot rates. Determine the 1 year forward rates at the beginning of year 0 through 7. Use annual compounding. Consider the formula 8 8 (1+yo, Show that it holds for your forward rates, and explain in a sentence why it must be true 1(1+y:-1, i=1 Year n Rate yo,n 0.024 0.0245 0.026 0.027 O voo + w N - 0.0275 0.0275 0.028 0.029
Pound: Spot and Forward Mid Rates Bid Ask 14484 14481 14487 Yen: Spot and Forward 15) Mid Rates Bid Ask Spot 129.87 129.82 129.92 Forward Rates 1 month 129.68 -20 -18 6 months 128.53 -136 -132 Swaps 2 year 117.65 1232 1212 3 year 115.50 1452 1422 1.4459 1.4327 -24 -154 -160 1.4250 1.4225 -238 -265 -230 -253 Refer to the above Table. The current spot rate of dollars per pound as quoted in a newspaper is A £1.4484/$: $0.6904/£...
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