Current spot rate is $1.20/€ French interest rate on a 30-day bond is 1.5% You expect...
3. The following conditions exist in the foreign exchange market: Current spot rate: $1.80/pound Annualized interest rate on 90-day dollar-denominated bonds: 896(296 for 90 days) Annualized interest rate on 90-day pound-denominated bonds: 12% (3% for 90 days) All financial investors expect the spot exchange rate to be $1.77/pound in 90 days. a. If a U.S. investor bases decisions solely on the expected rate of return, should that investor buy pound-denominated bonds or dollar-denominated bonds? Briefly explain. If a United Kingdom...
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?
5. (10 pts) This question is about covered interest parity. Suppose that a 30 day deposit has a local current interest rate of 5% in England and 3 % in the United States. The current spot rate is Es/= 1.25. If uncovered interest parity were to hold, what does the market expect the spot rate to be in 30 days? Explain your answer
3. The current interest rate on a one-year bond is 9%, and you expect the interest rate on the one-year bond next year to be 11%. What is the expected return over the two years?
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%
The following exchange rates exist on a particular day. Spot exchange rate: U.S. $1.400/euro Forward exchange rate (90 days): U.S. $1.427/euro The following (annualized) interest rates on 90-day government bonds also exist on this day: Euro-denominated bonds: 8% U.S. dollar–denominated bonds: 16% Financial investors in all countries have the expectation that the spot exchange rate in 90 days will be 0.7100 euro/U.S. dollar. Are investors expecting the euro will appreciate or depreciate during the next 90 days? Consider the comparison...
The current spot exchange rate between U.S. dollar and euro is $1.20/€ and a June 2020 call option on euro with a strike price of $1.21/€ commands a premium of $0.015/€. What is the intrinsic value of this option? What is the profit/loss if the option is exercised when the spot rate is $1.23/€ if the going interest U.S. interest rate is 2%?
Assume the current U.S. dollar-British spot rate is $1.3063=£. If the current nominal one-year interest rate in the U.S. is 1.5% and the comparable rate in Britain is 0.75%, what is the approximate forward exchange rate for 360 days? A. £1.2965/$ B. £0.7598/$ C. $1.2965/£ D. £1.3161/$
180-day U.S. interest rate 180-day Fijian interest rate 180-day forward rate of Fijian dollar (F$) Spot rate of Fijian dollar Expected spot rate of Fijian dollar in 90 days 49% 596 $0.49 $0.48 $0.47 Assume that Monte Christo Corporation in the U.S. will receive 500,000 Fijian dollars in 180 days. What is value of the receivable if Monte Christo implements a forward hedge? a. $240,000 b. $245,000 c. $235,000 d. None of these choices are correct.
Assume the following information: You have $900,000 to invest Current spot rate of Australian dollar (A$) is $0.62 180-day forward rate of the Australian dollar is $0.64 180-day interest rate in the U.S. is 3.5% 180-day interest rate in Australia is 3.0% What is the return obtainable after 180 days from covered interest arbitrage?