Assume that you believe that purchasing power parity (PPP) holds. You are an Australian investor with 225,000 AUD to invest for the next year. The current exchange rate is AUD/EUR 0.62. The expected inflation in Germany is 1.3%while the expected inflation in Australia is 3.6%. Current interest rates in Germany are 0.5% and in Australia 4.1%. What is your expected yield on a German investment?4.1%5.9%O 0.5%2.8%None of the other options are correct

Based on the purchasing power parity the interest and inflation have impact on exchange rate and…

assume that you believe that purchasing power parity (PPP) holds. You are an Australian investor with 225,000 AUD to invest for the next year. The current exchange rate is AUD/EUR 0.62. The exp while the expected inflation in Australia is 3.6%. Current interest rates in Germany are 0.5% and in Australia 4.1%. What is your expected yield on a German investment? 4.1% 5.9% 0.5% 2.8%

assume that you believe that purchasing power parity (PPP) holds. You are an Australian investor with 225,000 AUD to invest for the next year. The current exchange rate is AUD/EUR 0.62. The exp while the expected inflation in Australia is 3.6%. Current interest rates in Germany are 0.5% and in Australia 4.1%. What is your expected yield on a German investment? 4.1% 5.9% 0.5% 2.8%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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1.A research institution has just published projected inflation rates for the United States andGermany for the next year. U.S. inflation is expected to be at 10% per year while German inflationis expected to be at 4% per year. If the current exchange rate is $0.95/€, what should be theexchange rate for the next years? 4. Suppose exchange rate for the British pound, Euro, and Australia dollar were $1.400, $1.225, and$0.875, respectively. At the time, the associated 90-day interest rates (annualized) were 12%, 6%,and 4%, while the U.S. 90-day interest rate (annualized) was 8%. What was the 90-day forwardrate on a Dollar Currency portfolio (DCP) (DCP 1 = £1 + €1 + AU$1) if interest parity were tohold?
Suppose one Euro can purchase 1.25 U.S. dollars today in the foreign exchange market, and currency forecasters predict that the Euro will depreciate by 20% against the US dollar over the next 60 days. How many dollars will a Euro buy in 60 days? (Please show work)
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Nikul
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29. You are analyzing a potential 3-year investment in Switzerland. It will require an initial investment of SFr 540,000.00 and is forecasted to yield cashflows of SFr 540,000.00 for the next 3 years. As of today, the spot exchange rate is $0.6667 / SFr and the rates of inflation expected to prevail for the next year in the US is 7% and in 8% in Switzerland. Your estimated cost of capital in dollars is 16.7%. What is the NPV in dollars? (a) $425,391.63 (b) $245,409.63 (c) $638,055.54 (d) $548,449.87 (e) None of the above
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Subject:- finance
A Japanese investor can earn a 1 percent annual interest rate in Japan or about 3.5 percent per year in the United States. If the spot exchange rate YEN/USD is 101, what is the spot rate one-year from now (1 year forward rate) so an investor be indifferent between the U.S. and Japanese investments? a b с d 104.81 108.18 103.50 106.57
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