1. The interest rate on a 1-year Canadian bond is 4.5%. The current exchange rate is C $1= US $0.75. The 1-year forward rate is C $1= US $0.80. The return (denominated in %. US$) that a U.S. investor can earn by investing in the Canadian security is A) 11.4 B) 11.5 C) 11.6 D) 11.7

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

Assume the following information:U.S. investors have $1,000,000 to invest: 1-year deposit rate offered by U.S. banks = 10% 1-year deposit rate offered on British pounds = 13.5% 1-year forward rate of Swiss francs = $1.26 Spot rate of Swiss franc = $1.30 Given this information: A. interest rate parity exists and covered interest arbitrage by U.S. investors results in a yield above what is possible domestically. B. interest rate parity doesn't exist and covered interest arbitrage by U.S. investors results in a yield below what is possible domestically. C. interest rate parity exists and covered interest arbitrage by U.S. investors results in the same yield as investing domestically. D. interest rate parity doesn't exist and covered interest arbitrage by U.S. investors results in a yield above what is possible domestically.

a) Assume the following information:       180‑day U.S. interest rate = 8%       180‑day British interest rate = 9%       180‑day forward rate of British pound = $1.50       Spot rate of British pound = $1.48       Assume that a U.S. exporter will receive 400,000 pounds in 180 days.  Would it be better off using a forward hedge or a money market hedge?  Substantiate your answer with estimated revenue for each type of hedge.   b) As treasurer of a U.S. exporter to Canada, you must decide how to hedge (if at all) future receivables of 250,000 Canadian dollars 90 days from now.  Put options are available for a premium of $.03 per unit and an exercise price of $.80 per Canadian dollar (CA$).  The forecasted spot rate of the CA$ in 90 days follows:                                       Future Spot Rate                            Probability (%)                                             $.75                                                 50…