If spot rate is USD2.5968/OMR and interest rate for USD is 29% per annum. One-year forward exchange rate is USD 2.6008/OMR. If interest rate parity holds and USD is the Home currency, then calculate the interest for OMR? 1.8431% 0.021571% 2.1571% 0.018431%

If spot rate is USD2.5968/OMR and interest rate for USD is 29% per annum. One-year forward exchange rate is USD 2.6008/OMR. If interest rate parity holds and USD is the Home currency, then calculate the interest for OMR? 1.8431% 0.021571% 2.1571% 0.018431%

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

See similar textbooks

Related questions

Q: Calculate the one year forward exchange rate using the direct method: Spot Rate $ 1.4830 / € U.S…

A: Under this condition arbitrage opportunity is available. Investors can take the money from US and…

Q: Suppose a German importer owes an Australian exporting company 150,000 AUD, due in three months.…

A: Importer is the person who purchase the goods from foreign country. When the goods are purchased by…

Q: st rates in the U.S. andeuro are 4% and 6% respectively and the spot rate for Euro ($/€) is $1.1550,…

A: According to interest rate parity the forward rate and spot exchange rate both should be in…

Q: Suppose the spot $/¥ exchange rate is 0.007, the I -year continuously compound dollar - denominated…

A: The forward exchange rate refers to a contract where the rate at which the currencies can be traded…

Q: The current USD/euro exchange rate is 1.4000 dollar per euro. The six month forward exchange rate is…

A: Given Information : Current USD/Euro Exchange rate = 1.400 dollar per euro Six month forward…

Q: Use the information below to answer the following questions. U.K. Pound 6-months forward (£) Japan…

A: Risk-free rate refers to the rate at which the company is earning the returns without taking any…

Q: How is the cost of hedging payable will be if a 90-day forward rate of the euro completely estimate…

A: If we are able to completely identify the future spot rate in 90 days from now, then the entity will…

Q: Please use this information to answer the question below: A US firm's expected Accounts Receivables…

A: Given: Accounts receivables = EUR 15,000,000 Spot rate 1EURO = USD 1.25 Interest rate in US = 5%…

Q: Currently, the spot exchange rate is $1.56 per £ and the three-month forward exchange rate is $1.58…

A: The objective of the question is to determine whether the interest rate parity (IRP) is currently…

Q: Let the U.S. dollar-yen spot rate be ¥120/$. Also, let the 180-day forward exchange rate be…

A: Calculation- Forward discount = [[forward exchange rate - spot exchange rate)/ spot exchange…

Q: ou have the following information: the current exchange rate is SGD 0.40/ MYR. Meanwhile, the SGD…

A: Arbitrage profit is generated by purchasing and selling a same securities or portfolio at varying…

Q: The current USD/euro exchange rate is 1.4000 dollar per euro. The six month forward exchange rate is…

A: Given Information : Current USD/Euro Exchange rate = 1.400 dollar per euro Six month forward…

Q: Suppose the risk free rate in pounds (£) is 2.67% and the risk free rate in US dollars ($) is 5.03%.…

A: The forward exchange rate should be arbitrage-free because if the price is different from the…

Q: er annum in the U.S. and 5.7% per annum in the U.K. Assume that you can borrow £1,000,000 or its…

A: In monetary terms, the exchange rate (also known as the foreign exchange rate, forex rate, or rate)…

Q: 2. Suppose today's exchange rate is $1.23/€. The three-month interest rates on dollars and euros are…

A: Many Thanks for Question: Bartleby's Guideline: “Since you have posted a question with multiple…

Q: Suppose that the current spot exchange rate is €0.80/$ and the three-month forward exchange rate is…

A: Arbitrage profit Arbitrage is an investment strategy used by investors that involves buying and…

Q: Spot rate for the South African rand to Euro is, S0 = R10.2992/€. Interest rate in the Eurozone is…

A: Given: Spot rate (S0) = R10.2992/€ Euro interest rate = 10.95% South Africa interest rate = 2.12%

Q: The one-year interest rate is 1.00% in the U.S. and 3.10% in Canada. The current exchange rate of…

A: Using 1 USA = CAD 1.37

Q: Use the information below to answer the following questions. Canada dollar 6-months forward Japan…

A: CanadaJapanGreat BritainSpot rate1.2375100.31000.6794Forward rate1.2358100.07000.6779Risk-free(Rf)…

Q: Suppose one-year US Treasury bill pays 2.28% and one-year Canadian Treasury bill pays 0.95%. The…

A: Arbitrage is a process to earn profit by purchasing one security from the market and selling another…

Q: Suppose a German importer owes an Australian exporting company 150,000 AUD, due in three months.…

A: Expected spot rate is the rate at which an investor expects the currency to be traded after a…

Q: The exchange rate is $1.1752/€ Suppose you need €10,000. How many $? Suppose you have $5,000. How…

A: Exchange rate refers to the value of one currency in terms of another currency. It is the rate at…

Q: How much money have you made or lost?

A: The relative worth of two currencies, or the amount of one currency that may be exchanged for one…

Q: The 6-month interest rate in the US is 12.25% p.a. The 6-month interest rate in Canada is 15.25%…

A: Under Interest rate Arbitrage we should take the loan from lower rated interest country &…

Q: Spot rate €1.2562/£; 1 month forward €1.2662/£ Which of the two currencies is trading at forward…

A: Forward contracts are derivative contracts. In these contracts, a specified price is locked in for a…

Q: Currently, the USD/MXN rate is 19.7800 and the six-month forward exchange rate is 20.1700. The…

Q: The following current rates have been observed: Spot exchange rate: $1.25/SFr Expected future spot…

A: Interest rate perity is a forex management theory that establishes relationship between money market…

Q: alculate the monthly interest rate differences and estimate the AUD/USD exchange rate for each month…

A: With periodic interest rate of Australia (rA), periodic interest rate of US (rU) and exchange spot…

Q: 2. One year THB and USD forward rate (Expected spot rate in one year) is THB46.75/USD. The…

A: Forward rate per USD = THB46.75 Inflation rate in Thailand = 9% Inflation rate in US = 4%

Q: D4) When a 2-year currency swap between U.S. Dollars and Currency X is created, the exchange rate is…

A: Cross-currency swaps are OTC derivatives in which two parties agree to exchange interest and…

Q: The spot exchange rate is $1.98/£. If the expected exchange rate in one year is $2.01/£, and the…

A: Here,Spot price = $1.98Forward price = $2.01U.S. Interest rate = 5%To Find:One-year British interest…

Q: Currently, the spot exchange rate is $1.59 per £ and the three-month forward exchange rate is $1.61…

A: Here,Here,Spot Exchange Rate is $1.59 per £Three Month Forward Exchange Rate is $1.61 per £Three…

Q: he current exchange rate from dollars to British pounds is 1.03 ($/pound). The current dollar…

A: Current exchange rate=$1.03 ($/pound)Forward rate=$1.11Risk free rate=4%

Q: 6-month forward rate = €1.20/£ Euro-zone interest rate = 3% p.a. U.K. interest rate = 2% p.a. What…

A: Based on the interest rate parity the spot rate and forward rate should be in equilibrium with each…

Q: 5. How many USD will you receive?

A: The relative worth of two currencies, or the amount of one currency that may be exchanged for one…

Q: If the 4 month forward exchange rate is €:$= 1.2500 and the spot rate is €:$ = 1.2800, culate the…

A: “Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only…

Q: The E/S exchange rate is £1 = $1.30. US interest rate is 5% per year. UK interest ra 2% per year. a.…

A: Arbitrage strategy is risk free investment strategy which can be used for buying and selling in two…

Q: A currency dealer has good credit and can borrow either $1,000,000 or €800,000 for one one-year…

A: According to the purchasing power parity the purchasing power must be same all over the world and…

Q: Q6) A U.S. multinational firm has forecast the euro/dollar rate to be euro 1.10/USD in one year's…

A: Euro/Dollar (€/$) =1.10Dollar/pound ($/£ )=1.20Time period =1 yearRequired:Expected Rate for the…

Q: If spot rate is USD 2.5968/OMR and interst rate for OMR is 5% per annum . One year forward exchange…

A: If interest rate parity exists than exchange rate should reflect change in interest rate and must be…

Q: Suppose that the current EUR/GBP rate is 0.6674 and the one-year forward exchange rate is 0.6748.…

Q: Suppose that the current spot exchange rate is €0.85 per $ and the three-month forward exchange rate…

A: Spot exchange rate = € 0.85/$3-month forward exchange rate = € 0.8313/$US interest rate =…

Q: If the spot exchange rate is €1.39/$, interest in the USA is at an annual rate of 5.8%, interest in…

A: Spot exchange rate is the exchange rate prevailining today for exchanging one currency with another.…

Q: On January 31, 2019 the exchange rate between the US dollar and the euro was 1.14 USD/EUR. At the…

A: Purchasing power parity is the metric that measures the absolute purchasing power of various…

Question

If spot rate is USD2.5968/OMR and interest rate for USD is 2% per annum. One-year forward exchange rate is USD 2.6008/OMR. If interest rate parity holds and
USD is the Home currency, then calculate the interest for OMR?
1.8431%
0.021571%
2.1571%
0.018431%

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Inputs

VIEW

Answer

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

If the interest rate in Oman is 10% and in China is 15%. Current spot exchange rate is CNY16.59/0MR and one-year forward rate is CNY16.57/OMR. If you have the option to borrow OMR 1,000 from bank Muscat for one year then, on the basis of covered interest arbitrage how much arbitrage profit you can make? OMR 51.3880 None of these OMR 1,051.3880 OMR 1,000
The $/£ spot rate is $1.60/£1. The UK interest rate is 4% and the US interest rate is 9%. Calculate the one year forward rate using the covered interest parity formula. State if the pound is at a forward discount or at a forward premium, and why.
Assume the following information is available for the United States and Europe: Nominal interest rate Expected inflation Spot rate One-year forward rate a. Does IRP hold? IRP -Select- $ U.S. 4% 2% $ in this case. b. According to PPP, what is the expected spot rate of the euro in one year? Do not round intermediate calculations. Round your answer to three decimal places. EUROPE 6% 5% $1.13 $1.10 c. According to the IFE, what is the expected spot rate of the euro in one year? Do not round intermediate calculations. Round your answer to three decimal places. d. Reconcile your answers to parts (a) and (c). Parts a and c combined say that the forward rate premium or discount is [-Select- of the euro. ✓the expected percentage appreciation or depreciation
Suppose that the U.S. interest rate on one year Treasury notes was 4.5%. We will use this as the annual interest rate in the U.S. And suppose that the interest rate on the one-year German Treasury note was 4.1%. The spot rate is 1.0162 EUR/USD.. And the 3-month forward rate is 1.0188 Eur/USD. Is there an opportunity for covered interest arbitrage? If so, what would be the total profit if we borrowed $20 million for 3 months? A. YES- $27,395.21 would be the profit B. YES- $29,385.41 would be the profit C. YES- $31,695.53 would be the profit D. YES- $33,875.42 would be the profit E. NO- there is no opportunity for a profit
Q1-14 Suppose the expected spot rate (after 1 year) for euros (in terms of dollars) is $1.50, the current interest rate on euro deposits is 4.5%, and the current interest rate on dollar deposits is 5.5%. What current spot rate would satisfy the uncovered interest parity (UIP) equation? a. $1.65 b. $1.50 c. $1.25 d. $1.485
1.
Spot Exchange Rate is GBP 1.83155 = 1 OMR (For Immediate Delivery). Instead of buying GBP immediately you can enter into a contract with the bank to deliver the currency after 6 months. The bank has quoted 6 months forward rate as GBP1.83355 = 1 OMR. (Home Currency is OMR, which is given as Indirect quotes).
The Spot Exchange Rate is OMR 0.385030 = 1 USD and 90 days forward rate is OMR 0.394030 = 1USD (Home Currency is OMR, which is given as Direct quotes). Does the OMR is trading at premium or discount in 90 days forward market?
Please use this information to answer the question below: A US firm's expected Accounts Receivables in Euro Zone due in 1 year Current Spot Rate (SR) for EUR Annual interest rate in US (Rh) Annual interest rate in Euro Zone (RF) EUR 15,000,000 USD 1.25 5% O USD 17,578,125 OEUR 13,392,857 EUR 18,750,000 USD 16,741,071 12% If the firm uses money market hedge, one year from now, their accounts receivables will fetch them:
Today's spot exchange rate: 1 euro = $1.25.US interest rate (home interest rate) is 7%.EU interest rate (foreign interest rate) is 10%.a) If the IRP (Interest rate parity) holds, what should the forward exchange rate be today?b) Assume that today, you invest $500 in the EU market for one year and at the same time, enter a currency forward contract to sell euro in a year at the forward rate from part a). If today's spot exchange rate is: 1 euro=$1.32 instead of $1.25, show how much profits or losses you make next year.
Suppose a 1-year UK T-bill pays 2.14% and a 1-year Canadian T-bill pays 1.32%. The current spot exchange rate is 1 British pound (GBP) = 1.7244 Canadian dollar (CAD) and the 1-year forward exchange rate is 1 GBP = 1.6837 CAD. What arbitrage profit can an investor earn on an investment value of CAD 1 milion?
Suppose the current USD/EUR spot exchange rate is 1.20$/ €. At the same the euro interest rate amount to 10% per year while the dollar interest rate is 0% per year. a. What is the no-arbitrage one-year USD/EUR forward exchange? b. Suppose the one-year USD/EUR forward exchange was 1.25$/ €. How could you make money from this situation? 4

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS