Suppose the spot and six-month forward rates on the Norwegian krone are NKr 9.14 and NKr 9.27, respectively. The annual risk-free rate in the United States is 3.8 percent, and the annual risk-free rate in Norway is 5.7 percent. What must the six-month forward rate be to prevent arbitrage? Note: Do not include the Norwegian krone sign (NKr). Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Forward rate NKr 12.1300

Suppose the spot and six-month forward rates on the Norwegian krone are NKr 9.14 and NKr 9.27, respectively. The annual risk-free rate in the United States is 3.8 percent, and the annual risk-free rate in Norway is 5.7 percent. What must the six-month forward rate be to prevent arbitrage? Note: Do not include the Norwegian krone sign (NKr). Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Forward rate NKr 12.1300

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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Please Give me correct answer with explanation .ji
You use today's spot rate of the Brazilian real to forecast the spot rate of the real for one month ahead. Today's spot rate is $0.4577. Assume that you obtain the end-of-month spot exchange rates of the Brazilian real during the end of each of the last 6 months. End of Month 1 2 3 4 5 6 % $ Value of Brazilian real Use the value-at-risk method to determine the maximum percentage loss of the Brazilian real over the next month based on a 95 percent confidence level. Do not round intermediate calculations. Round your answer to two decimal places. $0.4244 0.4290 0.4283 0.4617 0.4725 0.4577 Forecast the exchange rate that would exist under these conditions. Do not round intermediate calculations. Round your answer to four decimal places.
Suppose that your company will be receiving 30 million euros six months from now and the euro is currently selling for 1 euro per dollar. If you want to hedge the foreign exchange risk in this payment, what kind of forward contract would you want to enter into?
Suppose that the interest rates in the U.S. and Germany are equal to 5%, that the forward (one year) value of the € is F$/€ = 1$/€ and that the spot exchange rate is E$/€ = 0.75$/€. Please answer the following questions by explaining all steps of your analysis: Does the covered interest parity condition hold? Why or why not? How could you make a riskless profit without any money tied up assuming that there are no transaction costs in buying and or selling foreign exchange? PLEASE SHOW ALL STEPS
1. Heidi Hoi Jensen is now evaluating the arbitrage profit potential in the same market after interest rates change. (Note that any time the difference in interest rates does not exactly equal the forward premium, it must be possible to make a CIA profit one way or another). Arbitrage fund available Spot exchange rate (kr/S) 3-month forward rate (kr/S) U.S. dollar 3-month interest rate Danish kroner 3-month interest rate S5,000,000 6.1720 6.1980 4.000% 5.000%
Suppose that the nominal interest rate in the euro area is 2%, and the nominal interest rate in Switzerland is 4%. Suppose inflation is expected to be 0.5% in the euro area. If the Fisher Effect holds, then the real interest rate in the euro area is approximately the expected inflation in Switzerland is O2%; impossible to determine. 1.5%; 2.5% 2.5%; 0.5% None of the above is correct. 1.5%; 0.5% and
Suppose the current USD/EUR spot exchange rate is 1.20$/ €. 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
The spot rate for the Japanese yen currently is A??Y107 per $1. The one-year forward rate is A??Y106 per $1. A risk-free asset in Japan is currently earning 7 percent. If interest rate parity holds, what rate can you earn on a one-year risk-free U.S. security? 6.07 percent 7.94 percent 8.01 percent 8.08 percent 6.00 percent
Suppose that the current EUR/GBP exchange rate is £0.86 per euro. The current 6-month interest rates are: GBP 4%, EUR 6%. There are three 6-month forward contracts available, with the following exchange rates: Contract A B C EUR/GBP 0.86 0.85 0.90 You expect to incur an expense of €50,000 in six months. Can you identify any relevant risk in terms of the EUR/GBP exchange rate? Would you use any of the available forward contracts to hedge against this risk? Explain and provide an example.
Nikul
Suppose that the current EUR/GBP rate is 0.6668 and the one-year forward exchange rate is 0.6742. The one-year interest rate is 1.8% in euros and 3.6% in pounds. You can borrow at most €1,000,000 or the equivalent pound amount. Suppose you are a pound-based investor. Determine the profit/loss (in GBP, no cents) if you borrow locally and invest in Euros.
The one-year interest rate in Australia is given as 0.5% and the one year interest rate in New Zealand is given as 1%. The spot rate of the New Zealand dollar is A$0.95. You will receive 10,000 New Zealand dollars in one year.(a) Using the international Fisher effect, calculate the expected change in the exchange rate for the New Zealand dollar.(b) Using your answer to (a), calculate the amount of Australian dollars you will receive when converting the New Zealand dollars to Australian dollars in one year at the spot rate at that time.

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