Please correct answer and don't use hand raiting Question 12SavedBased on the calculation and the conclusion you obtained for the previous 4questions, does Interest Rate Parity hold under the current market condition? What isthe 1-year forward rate of Singapore dollars that makes covered interest arbitrageinfeasible? (Round the answer to the 4 decimal places.)No. $0.7866.No. $0.7342.It cannot be determined.No. $0.7688.No. $0.8076.Question 12

To determine whether Interest Rate Parity (IRP) holds and to calculate the 1-year forward rate of…

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International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter7: International Arbitrage And Interest Rate Parity

Section: Chapter Questions

Problem 43QA

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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
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 $1.10 c. According to the IFE, what is the expected spot rate of the euro in one year? Do not round intermediate calculations. Round your answer to three decimal places. d. Reconcile your answers to parts (a) and (c). Parts a and c combined say that the forward rate premium or discount is [-Select- of the euro. ✓the expected percentage appreciation or depreciation
Given: So = INR 83/US$ F90 days = INR 83.2834/US$ 90-day iIndia = 6.91% 90-day ius = 5.34% a. there is no interest rate parity O b. there is total interest rate parity Oc. there is a possibility of triangle arbitrage O d. there is approximate interest rate parity
D Question 6 (Covered Interest Rate Parity) You are facing the following exchange rates and interest rates. Spot rate (¥/$) 180-day forward rate (¥/$) 102 148 180-day U.S. dollar interest rate 8.5% 180-day Japanese yen interest rate 3.2% If you can borrow $1,000,000 or the equivalent amount of yen, and you can profit from the covered interest arbitrage, then your profit is $ (Please keep two decimal places
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Please correct answer and don't use hand rating
8-OMR and US dollar are currently trading at OMR 3 = $1. Inflation in the US is expected to grow at 2% per annum and at 4% per annum in Oman. Which of the following is the future spot rate of OMR/$ in a year's time? (First 4 decimals consider for selecting the correct answer) a. None of the options b. OMR 3 $1 c. OMR 3.0598 = $1 d. OMR 3.8805 = $
Problem 4: The interest rate in the U.K. is 6% for 90 days, the current spot rate is $2.00/pound and the forward rate is $1.96/pound. If the covered interest parity holds, then the interest rate in the U.S. for 90 days would have to be?
QUESTION 9 The current spot rate of the US $ against the UK £ is $1.310 to £1. Inflation rates for the next year are expected to be 2% in the US and 3% in the UK. Using the purchasing power parity theory calculate the dollar exchange rate in one years' time. O A. 1.297 ОВ. 1.310 OC. 1.322 OD. 1.280 O E. 1.340
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QUESTION 2 EURUSD is trading in the spot market at S= 1.6000 European interest rates continuosly compounded are 0.1% US interest rates continuosly compounded are 0.5% Where would you expect to see the one year EURUSD forward price quoted? 0.6275 1.5936 1.6064 0.6225

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