Assume that the interest rate in the Japan is 6% and that the Yen is expected to depreciate by 2% against the Australian dollar during the year. For each Australian dollar that an Australian resident invests in Japanese bonds, he/she can expect to get back a total of: A. $1.24 B. $1.08 C. $1.14 D. $1.04 E. $0.84
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Assume that the interest rate in the Japan is 6% and that the Yen is expected to depreciate by 2% against the Australian dollar during the year. For each Australian dollar that an Australian resident invests in Japanese bonds, he/she can expect to get back a total of:
A. $1.24
B. $1.08
C. $1.14
D. $1.04
E. $0.84
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- If the spot rate is $0.50/NZ$ and the forward rate is $0.55/NZ$. The interest rate in USA is 9% and the interest rate in New Zealand is 4%. What would be per dollar benefit for the US investor from investing in New Zealand bonds? a. $0.054 b. -$ 0.054 c. $0.090 d. $ 0.040If the spot rate is $0.50/NZ$ and the formate rate is $0.55/NZ$. The intreste rate in USA is 9% and the intreste rate in New Zealand is 4%. What would be per doller benefit for the US investor from Investing in New Zealand bonds. A. $0.054 B. -$0.054 C. $0.090 D. $0.040suppose you purchased a 10 million one-year Australian dollar loan that pays 7 percent interest annually. The spot rate of U.S. dollars for Australian dollars (AUD/USD) is $0.820/A$1. What is par value of the loan in U.S. dollars?
- Let us consider two bonds: a 1-year domestic bond in Bangladesh, and a 1-year foreign bond from India. You can only invest 1,000 takas in one of these bonds. To help you decide, the following information is available: the domestic one-year interest rate, it = 6%; foreign one-year interest rate in India, it* = 9%; the nominal exchange rate of Bangladesh Taka in terms of Indian Rupee, Et = 0.83; and the expected nominal exchange rate, Et+1* = 0.91. (a) What is the return on investment on the one-year domestic bond? (b) What is the return on investment on the one-year foreign bond? Give your answer in 2 decimal places, if applicable. Solve both questionsa. In New Zealand, the one-year interest rate is 6%. The one-year interest rate in the United States is 10%. The New Zealand dollar (NZ$) has a spot rate of $.50. The New Zealand dollar has a forward rate of $.54. i. Explain if covered interest arbitrage can benefit US or New Zealand investors. i. Explain why covered interest arbitrage is or is not conceivable in each situation.Assume the following information regarding U.S. and European annualized interest rates: Currency U.S. Dollar ($) 4.5% Investment Rate Borrowing Rate 5.5% Euro (€) 5.1% 6.3% Golden R Inc. can borrow either $6 million or €5 million. The current spot rate of the euro is $1.02. Furthermore, Golden R Inc. expects the spot rate of the euro to be $1.35 in 60 days. What is Golden R. Inc.'s dollar profit from speculating if the spot rate of the euro is indeed $1.35 in 60 days? Your answer should be whole US dollars. No decimals.
- You are the financial manager for Belltower Associates, which is headquartered in Australia. You have received the below spot and interest rates quotes from your bank: Bid Ask NZD 0.8298/AUD NZD 0.8340/AUD 4.50% 5.00% 0.90% 1.30% Spot exchange rate Interest rate for AUD Interest rate for NZD Suppose that Belltower Associates has a receivable in NZD in one year's time and they wish to engage in a hedge to lock in their domestic (i.e. Australian dollar) currency equivalent of its value. Belltower Associates intends to achieve this by using their bank's spot rates and money market interest rates in order to create a synthetic forward contract. What is the effective forward exchange rate that Belltower Associates is able to achieve for hedging the AUD value of their NZD receivable? O a. NZD 0.8012/AUD O b. NZD 0.8635/AUD O c. O d. O e. NZD 0.8298/AUD NZD 0.8594/AUD NZD 0.7974/AUD NZD 0.8085/AUDAs a US multinational you decide to borrow long-term debt of 1 million JPY at 10% for one year. The exchange rate on the date you borrowed the debt is 100 JPY/$ and the exchange rate on the date you repaid the debt is 120 JPY/$. The Japanese inflation rate during the year is 6% and the US inflation rate is 4%. What is the nominal cost of borrowing the JPY debt in US$ terms? a) -8.33% b) -11.83% c) -12.33% d) +11.83%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
- Assume the following information: U.S. deposit rate for 1 year U.S. borrowing rate for 1 year New Zealand deposit rate for 1 year New Zealand borrowing rate for 1 year New Zealand dollar forward rate for 1 year New Zealand dollar spot rate = $.49 Also assume that a U.S. exporter denominates its New Zealand exports in NZ$ and expects to receive NZ$500,000 in 1 year. You are a consultant for this firm. = 3% = 4% Group of answer choices $235,841. $264,000. $245,000. $236,127. = 6% = 7% = $.48 Using the information above, what will be the approximate value of these exports in 1 year in U.S. dollars given that the firm executes a money market hedge?A. The value of the US Dollar today is GHS 6.1. Yesterday, the value of the US dollar was GHS 5.91. The Ghana Cedi ____ by ____%. B. Assuming that existing U.S. one year interest rate is 8% and the Canadian one-year interest rate is 9%. Also assume that interest rate parity exists. Should the forward rate of the Canadian dollar exhibit a discount or a premium? If U.S. investors attempt covered interest arbitrage, what will be their return? If Canadian investors attempt covered interest arbitrage what will be their return?Suppose that you know the following (i) New Zealand 3 month Treasury bills yield 10% per annum(ii) Japanese 3 month Treasury bills yield 8% per annum(iii) the spot exchange rate is ¥80 = $1(iv) the 3 month forward exchange rate is ¥77.5 = $1 The return to investing NZ$1 in New Zealand for 3 months is NZ$_____ (use 3 d.p. and include the original $1 invested in the value of the return) The return to investing NZ$1 in Japan for 3 months is NZ$_____ (use 3 d.p. and include the original $1 invested in the value of the return) The result of this is that we would expect the spot value of the $NZ to (Select: rise, fall, remain unchanged) and the forward value of the $NZ to (Select: rise, fall, remain unchanged).
