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Q: Estimate the one-year EUR interest rate
A: We can determine the one year interest rate in Europe by rearranging the formula below:
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1. Calculate the annual interest rate in France using the below information:
The annual interest in USA 3.00%
Spot exchange rate: EUR0.77065/USD
1 year Forward exchange rate EUR0.78125/USD
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- TIPS FOR READING AN EXCHANGE RATE CHART: Read down the chart. For example, in column 1 it says the US Dollar is equal to each of the currencies below it. Therefore $1 = .76 £ or $1 = .89 €. Exchange Rate Table for Month 1 US Dollar $1 = British Pound 1 £ = Chinese Yuan 1 Y = Japanese Yen 1 ¥ = Euro 1€ US Dollar --- 1.32 .16 .0088 1.13 British Pound .76 --- .12 .0067 .85 Chinese Yuan 6.37 8.46 --- .056 7.21 Japanese Yen 113.04 149.55 17.75 --- 127.55 Euro .89 1.17 .14 .0078 --- Exchange Rate Table for Month 2 US Dollar $1 = British Pound 1 £ = Chinese Yuan 1 Y = Japanese Yen 1 ¥ = Euro 1€ US Dollar --- 1.40 .20 .0080 1.17 British Pound .70 --- .11 .0065 .89 Chinese Yuan 6.20 8.72 --- .062 7.59 Japanese Yen 116.24 146.89 16.32 --- 117.2 Euro .92 1.11 .15 .0078 --- An American company contracts a…If the Australian/US dollar exchange rate is 0.72 USD/AUD, US interest rates are 0.25% and Australian interest rates are 0.75% (both for 1 year), what should the 1-year forward USD/AUD exchange rate be?a) A stock sells for $125. A call option on the stock has an exercise price of $110 and expires in 3 months. If the interest rate is 0.15 and the standard deviation of the stock's return is 0.30. What would be the price of a put option on the same stock with an exercise price of $140 and the same time (3 months) until expiration? Show all workings. (See Appendix for the Cumulative Normal Distribution Table)
- 13. The forward exchange rate of 55 days is 1.21 USD/Euro while the current exchange rate is 1.22 USD/Euro. The annual interest rate of USA is 1.13% and of Eurozone is 1.18%. Calculate and show me how you have solved it the cost of the term act and choose one of the following: a. -5.365% b. 5.365% c. -0.819% d. 8.2%A European investor can earn a 4.75% annual interest rate in Europe or 2.75% per year in the United States. If the spot exchange rate is $1.58 per euro, at what one-year forward rate would an investor be indifferent between the U.S. and Japanese investments? A. $1.6108 B. $1.5335 C. $1.5484 D. $1.5498c. Consider the spot exchange rate between the € and the pound sterling E€/£=1.50, while the annual forward exchange rate is F€/£=1.60. The annual interest rate is 5.4% in Italy and 5.2% in the UK. Assume that you can borrow up to €1,000,000 or £666,667, at the current spot exchange rate. i. Show how you can make profits from covered interest arbitrage. Consider you are an Italian investor. What is your profit? ii. Explain how the interest rate parity will be restored as a result of covered arbitrage activities. iii. Suppose you are a British investor. Show the covered arbitrage process and compute profits in terms of £. Note: Round your answers to the second decimal point.
- The one-year risk-free rate in the U.S. is 4.340 percent and the one-year risk-free rate in Mexico is 6.64 percent. The one-year forward rate between the Mexican peso and the U.S. dollar is MXN12.366/$. What is the spot exchange rate? Assume interest rate parity holds. Multiple Choice MXN13.969/$ MXN14.939/$ MXN12.366/$ MXN12.639/$ MXN12.099/$Exchange Rate If euros sell for $1.57 (U.S.) per euro, what should dollars sell for in euros per dollar? Round your answer to four decimal places.The spot exchange rate between the Swiss Franc and U.S. dollar was 1.0404 ($ per franc). Interest rates in the U.S. and Switzerland were 0.65% and 0.20% per annum, respectively, with continuous compounding. 1.If there is no arbitrage opportunity, what is the three-month forward exchange rate ($ per franc)? 2.Suppose that the three-month forward exchange rate was 1.0300 ($ per franc). Is there an arbitrage? If so, construct the arbitrage that results in zero cash flow today and positive cash flow (in USD) in three months. 3.Calculate the arbitrage profit (in USD) when you implement the arbitrage strategy with 50 Swiss Franc.
- If the spot rates are $0.50/NZ$ and the spot rate is C$0.55/NZ$. The interest rate in USA is 9% and the interest rate in Canada is 4%. What could be the forward exchange rate between Canadian dollar and US dollar? a. $1.1529/C$ b. C$1.1529/$ c. C$0.9528/$ d. C$0.8674/$In a currency swap, using the information below, can you calculate the quarterly payments that should be made in Australian dollars? The exchange rate is 1.3 Australian dollars per one US dollar and the notional amount in Australian dollars is $100,000.00 TTM PVF 90 180 270 360 Singapore Dollars 0.98 0.94 0.93 0.89 PVF US Dollars 0.99 0.98 0.97 0.96 Please round your answer to the nearest three decimals. Do not type the $ symbol.The Cambodian interest rate is 6% and the Vietnam interest rate is 7%. The spot exchange rate of one Cambodian riel is 5.6 Vietnamese dong (VND) and the one-year forward rate of riel is VND5.7. If there now occurs a change in the interest differential such that money flows from Vietnam to Cambodia in a covered interest arbitrage, as a result of this money flow the forward riel exchange-rate will _____. a. depreciate b. appreciate c. remain the same
