interest rate: 7% UK interest rate: 18% US inflation: 2% Canada inflation: 11% If parity conditions hold, the interest rate in Canada will approximately be equal to: a.2% b.27% c.23% d.16%
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US interest rate: 7%
UK interest rate: 18%
US inflation: 2%
Canada inflation: 11%
If parity conditions hold, the interest rate in Canada will approximately be equal to:
a.2%
b.27%
c.23%
d.16%
e.11%
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- 30 of 38 Suppose that the one-year interest rate is 2.1% in Canada and 4.4% in Germany. The current exchange rate of Canadian dollar (CAD) to Euro is CAD 1 = Euro 0.69. What is the expected exchange rate after one year that satisfies the interest rate parity condition? O A. CAD 1 = Euro 0.722 O B. CAD 1 = Euro 0.706 O C. CAD 1 = Euro 0.659 O D. CAD 1 = Euro 0.675 UnsureAssume the following information: Spot rate of U.S. dollar Quoted Price AUD1.2500/USD 180-day forward rate of U.S. dollar 180-day Australian interest rate (a periodic rate) 180-day U.S. interest rate (a periodic rate) AUD1.2800/USD 4.75% 3.10% A. What USD-denominated percent rate of return can a US investor earn if they attempt covered interest arbitrage? (to two decimal places like 6.54%) B. What AUD-denominated percent rate of return can an Australian investor earn if they attempt covered interest arbitrage? (to two decimal places like 6.54%) C. Given this information, who has a covered interest arbitrage opportunity? Answer either "Australian investors" or "U.S. investors". D. What changes in the 2 quoted prices above would likely occur to eliminate any further possibilities of covered interest arbitrage? (answer with just or 1) Spot rate of U.S. dollar 180-day forward rate of U.S. dollarIntegrating IRP and IFE Assume the following information is available for the United States and Europe: U.S. EUROPE Nominal interest rate 4% 6% Expected inflation 2% 5% Spot rate — $1.13 One-year forward rate — $1.10 Does IRP hold? According to PPP, what is the expected spot rate of the euro in one year? According to the IFE, what is the expected spot rate of the euro in one year? Reconcile your answers to parts (a) and (c).
- Currency Cross Rates Pen CS Per USS Per EUR Canadian dollar (CS) U.S. dollar (USS) Euro (EUR) 1.00 1.0889 1.3051 0.9184 1.00 1.1986 0.7662 0.8343 1.00 if the Canadian dolar appreciates by CS0 DO88 relative to the EUR what will the new value be of EUR per CS? Note: Piease make sure your nal answeris rounded to the nearest 4 decima places Value - EUR 0.00 per CSAssume the following information regarding U.S. and European annualized interest rates: Currency U.S. Dollar ($) 4.5% Investment Rate Borrowing Rate 5.5% Euro (€) 5.1% 6.3% Golden R Inc. can borrow either $6 million or €5 million. The current spot rate of the euro is $1.02. Furthermore, Golden R Inc. expects the spot rate of the euro to be $1.35 in 60 days. What is Golden R. Inc.'s dollar profit from speculating if the spot rate of the euro is indeed $1.35 in 60 days? Your answer should be whole US dollars. No decimals.Use the information below to answer the following questions. Canada dollar 6-months forward Japan Yen 6-months forward U.K. Pound 6-months forward Currency per U.S. $ 1.2375 1.2358 100.3100 100.0700 0.6794 0.6779 Suppose interest rate parity holds, and the current risk-free rate in the United States is 4 percent per six months. Requirement 1: What must the six-month risk-free rate be in Canada? [Select] [Select] Requirement 2: What must the six-month risk-free rate be in Japan? [Select] Requirement 3: What must the six-month risk-free rate be in Great Britain?
- The one-year forward rate for the Swiss franc is SF1.1505/$. The spot rate is SF1.1626/$. The interest rate on a risk-free asset in Switzerland is 2.71 percent. If interest rate parity exists, what is the one-year risk-free rate in the U.S.? Multiple Choice 1.64% 3.32% 3.55% 3.03% 3.79%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 depreciationSuppose the expected rate of inflation in year 1 and year 2 is 3% p.a. and 4% pa. respectively in Australia. What must the constant annual expected rate of inflation be in the US such that the exchange rate today is the same at the end of year 27 O a. 7.000% O b 7.1225% Oc 5.4925% O d. 3.4988%