Assume that the Australian dollar's spot rate is $1.25 and that the Australian and U.S 1 year interest rates are initially 8%. Then assume that the Australian 1-year interest rate increases by 5% points, while the U.S 1 year's interest rate remains unchanged. Using this information and the international fisher effect (IFE) theory, forecast the spot rate for 1 year ahead. (a) $2.33 (b) $1.19 (c) $4.67 (d) $6.78

Subject:- finance

1.A research institution has just published projected inflation rates for the United States andGermany for the next year. U.S. inflation is expected to be at 10% per year while German inflationis expected to be at 4% per year. If the current exchange rate is $0.95/€, what should be theexchange rate for the next years? 4. Suppose exchange rate for the British pound, Euro, and Australia dollar were $1.400, $1.225, and$0.875, respectively. At the time, the associated 90-day interest rates (annualized) were 12%, 6%,and 4%, while the U.S. 90-day interest rate (annualized) was 8%. What was the 90-day forwardrate on a Dollar Currency portfolio (DCP) (DCP 1 = £1 + €1 + AU$1) if interest parity were tohold?

Assume the following information: Current spot rate of New Zealand dollar = $.41 Forecasted spot rate of New Zealand dollar six months from now = $.43 Six month forward rate of the New Zealand dollar = $.44 Six month interest rate on New Zealand dollars (annual rate) = 8% Six month interest rate on U.S. dollars (annual rate) = 9% What are the potential profits in USD or NZD from interest rate arbitrage if you can start with 1,000,000 USD or 1,000,000 NZD? a. 13.27% b. 5.87% c. 58340.20 NZD d. $115,271