6. The 2-year interest rates in Australia and the U.S. are 7% and 5%. The spot exchangerate between the Australian dollar (AUD) and the US dollar (USD) is 0.6200 USD perAUD, and 2-year forward exchange rate is 0.6300.(3%) (a) Given spot exchange rate, what is the "right" 2-year forward exchange rate?(5%) (b) Is there arbitrage opportunity? If yes, please specify the detailed arbitrage strategy.Please10

The relative worth of two currencies, or the amount of one currency that may be exchanged for one…

Answered: (a) Given spot exchange rate, what is…

(a) Given spot exchange rate, what is the "right" 2-year forward exchange rate? (b) Is there arbitrage opportunity? If yes, please specify the detailed arbitrage strategy.

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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Concept explainers

Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.

Question

6. The 2-year interest rates in Australia and the U.S. are 7% and 5%. The spot exchange
rate between the Australian dollar (AUD) and the US dollar (USD) is 0.6200 USD per
AUD, and 2-year forward exchange rate is 0.6300.
(3%) (a) Given spot exchange rate, what is the "right" 2-year forward exchange rate?
(5%) (b) Is there arbitrage opportunity? If yes, please specify the detailed arbitrage strategy.
Please
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Exchange rate changes from 4.0 EUR/PLN till 3.80 EUR/PLN, so it means: Select one alternative: appreciation of zloty appreciation of euro depreciation of zloty
A 3. Briefly explain below the different theories about the irrelevance/relevance of exchange rates. Think and discuss about all the firms' factors that are affected by movements in exchange rates.
Q1-10 If a PPP estimate of the dollar/pound exchange rate is $1.61/£ and the current spot rate is observed to be $1.68/£, on the basis of these two rates you should, viewing the long-run, a. expect the dollar to appreciate against the pound. b. take a "short" position in dollars. c. expect the pound to appreciate against the dollar. d. have no expectation regarding the likely movement of the dollar/pound exchange rate.
a)explain how to price a currency swap if either set of payments is at a floating rate. b)explain how a currency swap can be used to convert a loan in one currency into a loan in another currency, and provide some reasons for doing so. c)demonstrate that a currency swap contract is equivalent to a series of forward contracts. d)explain how a currency swap can be used to hedge a stream of foreign cash flows. e)define interest rate derivatives, and compare and contrast them against bond derivatives.
2.what topics and structure should i cover for a literature review for the topic . Impact of exchange rate on fdi .please explain in detail every step
Match macroprudential instruments with the types of measures. (you can also write down the matches in your answers, no need to fill in the blanks below!) Liquidity-Related Macroprudential Instruments/Types Limits on Net Open Currency Positions/Currency Mismatch Caps on Foreign Currency Lending Time-Varying/ Dynamic Provisioning Restrictions on Profit Credit-Related Capital-Related Distribution Caps on the LTV
a. Explain forecasting exchange rates. b. Explain four forecasting techniques.
A foreign currency futures contract is a commitment to exchange certain amount of currencies in a specified exchange rate at a specified time in the future. Select one: True False
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