The spot rate between Japan and the U.S. is ¥100.37 = $1, while the one-year forward rate is ¥99.97 = $1. A one-year risk-free security in the U.S. is yielding 3.8 percent. What is the rate of return on a one-year risk-free security in Japan assuming that interest rate parity exists?
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The spot rate between Japan and the U.S. is ¥100.37 = $1, while the one-year forward rate is ¥99.97 = $1. A one-year risk-free security in the U.S. is yielding 3.8 percent. What is the
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- The spot rate between the Japanese yen and the U.S. dollar is ¥108.52/$, while the one-year forward rate is ¥108.77/$. The one-year risk-free rate in the U.S. is 2.99 percent. If interest rate parity exists, what is the one-year risk-free rate in Japan?The spot rate for the Japanese yen currently is A??Y107 per $1. The one-year forward rate is A??Y106 per $1. A risk-free asset in Japan is currently earning 7 percent. If interest rate parity holds, what rate can you earn on a one-year risk-free U.S. security? 6.07 percent 7.94 percent 8.01 percent 8.08 percent 6.00 percentAssume interest rate parity holds. The one-year risk-free rate in the U.S. is 3.38 percent and the one-year risk-free rate in Japan is 3.75 percent. The spot rate between the Japanese yen and the U.S. dollar is ¥112.65/$. What is the one-year forward exchange rate?
- A New Zealand company will receive a payment in USD in one year. It wants to hedge its exchange rate risk exposure. It will do this by entering into a currency forward contract to buy NZD in exchange for USD in one year. Use this information to help answer the questions that follow. (a) The current spot exchange rate for the New Zealand dollar per US dollar (NZD/USD) is 1.5836. The one-year risk-free rates are 2.0% for the New Zealand dollar and 3.5% for the US dollar. According to CIP, the no-arbitrage one-year NZD/USD forward exchange rate is closet to: Select alternative ✓ (b) Suppose that the company decides to wait a few more weeks before hedging. It then enters into a currency forward contract to buy NZD in exchange for USD at a rate of 1.5502 NZD per USD. A year later, when the company receives the USD payment, the spot NZD/USD exchange rate is 1.6123. In this case, the company would have been Select alternative if it had not hedged.The following information is the same for Questions 19 - 20. Currently, the spot exchange rate is USD/AUD = 0.85, and the one-year forward exchange rate is USD/AUD = 0.90. One-year risk-free interest rate is 5.5 % in Australia and 3.2% in the United States. You are the U.S. investor evaluating whether there is an opportunity for a covered interest rate arbitrage. You may borrow up to 1,000,000 USD or 1,176,470 AUD. Compute the risk-free arbitrage profit. 85,058 USD O45, 058 USD 38 USD 68,563 USDSuppose the spot rate of the yen today is $0.0100 while the three-month forward rate is $0.0096. How can a U.S. exporter who is to receive 350,000 yen in three month hedge its foreign exchange risk? What happens if the exporter does not hedge and the spot rate of the yen in three months is $0.0098?
- Assume interest rate parity holds. The one-year risk-free rate in the U.S. is 4.98 percent and the one-year risk-free rate in Japan is 5.37 percent. The spot rate between the Japanese yen and the U.S. dollar is ¥116.85/$. What is the one-year forward exchange rate? Multiple Choice ¥117.28/$ ¥119.15/$ ¥120.12/$ ¥116.85/$ ¥116.42/$The one-year risk-free rate in the U.S. is 4.340 percent and the one-year risk-free rate in Mexico is 6.64 percent. The one-year forward rate between the Mexican peso and the U.S. dollar is MXN12.366/$. What is the spot exchange rate? Assume interest rate parity holds. Multiple Choice MXN13.969/$ MXN14.939/$ MXN12.366/$ MXN12.639/$ MXN12.099/$assume that the one-year interest rate is 4.0 percent in the united states; the spot exchange rate is $1.25/euro, and the one-year forward exchange rate is $1.16/ euro, what must the one - year interest rate be in the euro - zone to avoid arbitrage?
- Use the information below to answer the following questions. Currency per U.S. $ 1.2380 1.2353 Australia dollar 6-months forward Japan Yen 6-months forward U.K. Pound 6-months forward 100.3600 100.0200 .6789 .6784 Suppose interest rate parity holds, and the current six month risk-free rate in the United States is 5 percent. Use the approximate interest rate parity equation to answer the following questions. a. What must the six-month risk-free rate be in Australia? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What must the six-month risk-free rate be in Japan? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Australian risk-free rate b. Japanese risk-free rate c. Great Britain risk-free rate c. What must the six-month risk-free rate be in Great Britain? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) % % %The US 1 year spot rate is 3.61% and the Mexican 1 year spot rate is 7.44%. A US investor purchases a Mexican corporate bond with an expected 1 year return of 9.76%, as measured in Mexican peso. The current USD/MXP exchange rate is 0.18. If the investor decides to hedge the currency risk exposure in the forward market, what would be the expected return on this portfolio, if interest rate parity holds?Suppose current one-year interest rate in Europe is 5%, whereas one-year interest rate in the U.S. is 3%. Assume the current spot price of euro (EUR) is $1.10. Answer questions a) and b) below. If the exchange rate movement is consistent with the international Fisher effect (IFE), what will the spot price of EUR in one year be? Consider a trader who does not believe the IFE holds. The trader has decided to borrow $110,000 to invest in EUR-denominated deposits for one year without hedging. Recall the current EUR spot rate is $1.10. If the EUR spot rate in one year turns out to be $1.09, what will be the percentage return on this trading strategy?