You have $1000 to invest. Current spot rate of British pound is £1 = $1.45, 1-year forward rate of pound £1= $1.40, 1-year interest rate in U.S.= 2%, 1-year interest rate in Great Britain = 3%. (a) If you use covered interest arbitrage strategy for a 1-year investment, what will be the amount of U.S. dollars you will have after 1 year? (b) Based on your calculation, explain where do you want to invest?
You have $1000 to invest. Current spot rate of British pound is £1 = $1.45, 1-year...
A) The spot price of the British pound is currently $2.00. If the risk-free interest rate on 1-year Government bonds is 4% in the United States and 6% in the United Kingdom, what must be the forward price of the pound for delivery 1 year from now? B) Assume that the spot price of gold is $1,500 per troy ounce, the risk-free interest rate is 2%, and storage and insurance costs are zero. 1) What should be the forward price...
Assume that you have the following information: Spot Rate: Six-month Forward Exchange Rate: One-Year NZD Interest Rate: One-Year GBP Interest Rate: NZD: New Zealand Dollar GBP: Great Britain Pound 1.98 NZD/1 GBP 2.07 NZD/1 GBP 0.63 % annually -0.26 % annually is covered interest arbitrage worthwhile? If so, calculate the profits after six-months, assuming that you have 5,650 NZD. What else might you do to maximize profits if the covered interest arbitrage is worthwhile (explain in words)?
Given that the spot rate is 1.5 euros per pound and the forward euro-pound exchange rate is 1.575 euros per pound calculate the forward premium discDunt on the British pound and indicate which of the two it is. Consider a Dutch investor with 1 000 euros to pace in a bank deposit in either the Netherlands or Great Britain. The one-year interest rate on bank deposits is 2% in Britain and 4.04% in the Netherlands. The one year forward euro-pound...
The one-year forward rate of the British pound is $1.3985, while the current spot rate is $1.2239. Based on the forward rate, what is the expected percentage change in the British pound over the next year? Round to four decimals. Example: 0.1234
Assume the following information: U.S. investors have $1,000,000 to invest: 12% 10% 1-year deposit rate offered on U.S. dollars 1-year deposit rate offered on Singapore dollars 1-year forward rate of Singapore dollars Spot rate of Singapore dollar $.412 $.400 Given this information: O interest rate parity exists and covered interest arbitrage by U.S. investors results in the same yield as investing domestically. O interest rate parity doesn't exist and covered interest arbitrage by U.S. investors results in a yield above...
Assume the following information regarding U.S. and British currency values and 1-year rates: Spot Rate $1 = £0.8299 1-Year Forward Rate $1 = £0.8631 British 1-Year Interest Rate 7.0% U.S. 1-Year Interest Rate 5.0% Given this information, what is the yield (or profits) to a British investor who conducts covered interest arbitrage with 1,000,000 British pounds. Round to one decimal and give it as a percent. So, if you calculate the answer to be .0438, you would answer 4.4 for...
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?
Assume the following information You have $420,000 to invest Current spot rate of Sudanese dinar (SDD) = $.00570 90-day forward rate of the dinar = $.00569 90-day interest rate in the U.S. = .04 90-day interest rate in Sudan = 0.044 If you conduct covered interest arbitrage, what amount will you have after 90 days?
23. Assume the following information: You have $900,000 to invest: Current spot rate of Australian dollar (AS) 180-day forward rate of the Australian dollar 180-day interest rate in the U.S. 180-day interest rate in Australia $.62 -.64 3.5% 3.0% If you conduct covered interest arbitrage, what is the dollar profit you will have realized after 180 days?
Assume the current U.S. Dollar-British spot rate is $1.4300/£. If the current nominal one-year interest rate in the U.S. is 5% and the comparable rate in Britain is 6%, what is the approximate forward exchange rate for 360 days?