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- Assume the following information: Spot rate today of Swiss franc 1-year forward rate as of today for Swiss franc Expected spot rate 1 year from now Rate on 1-year deposits denominated in Swiss francs Rate on 1-year deposits denominated in U.S. dollars : $.60 %. = = $.63 = = $.64 = 7% = 9% From the perspective of U.S. investors with $1,000,000, covered interest arbitrage would yield a rate of return ofAssume that the Australian dollar's spot rate is $1.25 and that the Australian and U.S 1 year interest rates are initially 8%. Then assume that the Australian 1-year interest rate increases by 5% points, while the U.S 1 year's interest rate remains unchanged. Using this information and the international fisher effect (IFE) theory, forecast the spot rate for 1 year ahead. (a) $2.33 (b) $1.19 (c) $4.67 (d) $6.78Assume the following information: Spot rate of Mexican peso $0.100 1-year forward rate of Mexican peso $0.099 1-year Mexican interest rate 6% 1-year U.S. interest rate 5% 1. Given this information, what would be the yield (percentage return) to a U.S. investor who used covered interest arbitrage? (Assume the investor invests $1,000,000.) 2. What market forces would occur to eliminate any further possibilities of covered interest arbitrage?
- Assume the following information: Current spot rate of Australian dollar = $.64 Forecasted spot rate of Australian dollar 1 year from now = $.59 1-year forward rate of Australian dollar = $.62 Annual interest rate for Australian dollar deposit = 9% Annual interest rate in the United States = 6% Use the above information to show the gain a trader could have from covered interest arbitrageAssume the following information: U.S. investors have $1,000,000 to invest: 1-year deposit rate offered by U.S. banks = 10% 1-year deposit rate offered on Swiss francs = 13.5% 1-year forward rate of Swiss francs = $1.26 Spot rate of Swiss franc = $1.30 Does IRP hold? Is there an arbitrage opportunity?Assume the following information (rates are actual 90-day interest rates, not annualized): Spot rate of Canadian dollar S 0.900 90 day forward rate of Canadian dollar $0.890 90-day Canadian interest rate 3.50% 90-day U.S. interest rate 2.40% Given this information, the yield (percentage return) to a U. 5. investor who used covered interest arbitrage would be ( assume the investor invests $1 million). The yield (percentage return) to a Canadian investor who used covered interest arbitrage would be Group of answer choices
- Assume the following information: Spot rate of £ = $1.60 180-day forward rate of £ = $1.56 180-day British interest rate = 4% a. Based on this information, is covered interest arbitrage by US investors is possible (assuming that U.S. investors have $1,000,000)? If yes, Explain how to conduct it in your words. b. Suppose: 180-day US interest rate = 3%. Is the above strategy is feasible? Explain your %3D answerAssume the following information: Current spot rate of New Zealand dollar = $.41 Forecasted spot rate of New Zealand dollar six months from now = $.43 Six month forward rate of the New Zealand dollar = $.44 Six month interest rate on New Zealand dollars (annual rate) = 8% Six month interest rate on U.S. dollars (annual rate) = 9% What are the potential profits in USD or NZD from interest rate arbitrage if you can start with 1,000,000 USD or 1,000,000 NZD? a. 13.27% b. 58340.20 NZD c. 5.87% d. $115,271Assume that interest rate parity holds. The U.S. four-year interest rate is 5% annualized, and the Indian four-year interest rate is 8% annualized. Today's spot rate of the Indian rupee is $.14. What is the approximate four-year forecast of the rupee's spot rate if the four-year forward rate is used as a forecast? A. $.174. B. $.262. C. $.125. D. $.226. E. $.115.
- The $/£ spot exchange rate is currently $1.50 per pound and is expected to fall to $1.42 per pound one year from now. The annual interest rate on pound deposits is 5 percent. A. Calculate the expected annual dollar rate of return on one-year British-pound deposits using the precise approach. B. Calculate the expected annual dollar rate of return on one-year British-pound deposits using the approximation approach.You have the following financial market information. You also have 1.34 million Australian dollar (A$) or 3.91 million Thai baht (THB) to make a profit due to covered interest arbitrage (CIA). Calculate the profit in A$ or THB if the CIA opportunity exists in the market. (enter the whole number without sign and symbol) THB spot rate THB one-year forward rate A$ spot rate A$ one-year forward rate Interest rate on A$ Interest rate on THB Bid price A$0.0408 A$0.0491 THB22.0891 THB27.5141 Deposit rate 2.28% 6.88% Ask price A$0.0606 A$0.0663 THB24.4134 THB29.8197 Loan rate 4.46% 8.77% Answer:Assume the following information: You have $400,000 to investCurrent spot rate of Sudanese dinar (SDD) = $.0057090-day forward rate of the dinar = $.0056990-day interest rate in the U.S. = 4.0%90-day interest rate in Sudan = 4.2% If you conduct covered interest arbitrage, what amount will you have after 90 days?
