Chinese RMB is currently priced at $17 per 100 yuan. Assume a continuously compounding interest rate on dollar at 1%, and a continuously compounding interest rate on RMB at 5%. Assume both RMB and dollar can be traded freely without cost. What is the 2 - year forward price on 100 yuan? (Round to 2 decimals)"

Chinese RMB is currently priced at $17 per 100 yuan. Assume a continuously compounding interest rate on dollar at 1%, and a continuously compounding interest rate on RMB at 5%. Assume both RMB and dollar can be traded freely without cost. What is the 2 - year forward price on 100 yuan? (Round to 2 decimals)"

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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unc.3 Your company can get yen loans for 2.0%. Dollar rates on the same loans are 4.5%. The spot yen per dollar exchange rate is 104. The forward rates for years 1 thru 4 are, 101.51, 99.08, 96.71, and 94.40, respectively. What is the present value of the market-maker's net cash flow if spot rates are 102 instead? A) $188.59 B) $206.43 C) $219.96 D) $242.06
Han Co wishes to predict the exchange rate between the dollar ($) and the euro (€), based on the following information: Spot exchange rate $1= €1.6515 Dollar interest rate 4.5% per year Euro interest rate 6.0% per year Which of the following is the one-year forward rate, using interest rate parity theory? O $1= €1.2386 O $1= €1.6752 O $1= €2.2020 O $1= €1.6281
Assume the following information is available for the United States and Europe: Nominal interest rate Expected inflation Spot rate One-year forward rate a. Does IRP hold? IRP -Select- $ U.S. 4% 2% $ in this case. b. According to PPP, what is the expected spot rate of the euro in one year? Do not round intermediate calculations. Round your answer to three decimal places. EUROPE 6% 5% $1.13 $1.10 c. According to the IFE, what is the expected spot rate of the euro in one year? Do not round intermediate calculations. Round your answer to three decimal places. d. Reconcile your answers to parts (a) and (c). Parts a and c combined say that the forward rate premium or discount is [-Select- of the euro. ✓the expected percentage appreciation or depreciation
If the interest rate in USD is 1%, and is 1.2% for Canadian Dollar deposits, find the forward price of a Canadian Dollar when the current exchange rate is 1.1, and expiration is three years from signing? b) If the Forward price of a Canadian dollar is currently 1.2, how could you use the synthetic to do arbitrage?
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
If spot rate is USD2.5968/OMR and interest rate for USD is 2% per annum. One-year forward exchange rate is USD 2.6008/OMR. If interest rate parity holds and USD is the Home currency, then calculate the interest for OMR? 1.8431% 0.021571% 2.1571% 0.018431%
1.
Newstar Co. expects to pay 500,000 euro in one year. Assume the annual interest rate of borrowing or lending euro is 1% and the annual interest rate of borrowing or lending U.S. dollar is 2%. The spot rate of euro is $1.12 per euro. How much guaranteed amount of U.S. dollar does the company expect to pay after hedging the euro payable transaction in the international money market? (pick the closest answer) A. 565,545 USD. B. 554,510 USD. C. 562,786 USD. D. 576,912 USD.
Suppose a 1-year UK T-bill pays 2.14% and a 1-year Canadian T-bill pays 1.32%. The current spot exchange rate is 1 British pound (GBP) = 1.7244 Canadian dollar (CAD) and the 1-year forward exchange rate is 1 GBP = 1.6837 CAD. What arbitrage profit can an investor earn on an investment value of CAD 1 milion?
Currently, the spot rate is RM4.2000/USD and the one year forward rate is RM4.1000/USD. Interest rate in United States is 3% per annum and in Malaysia is 2% per annum. Assume that you can borrow as much as USD100,000 or RM420,000 for your coming project. If Interest Rate Parity (IRP) is not holding, determine how would you carry out covered interest arbitrage (CIA) and compute the profit.
Suppose that the interest rate on a US dollar deposit is 3% and the interest rate on a Japanese yen deposit is 1%. Today’s exchange rate is $1/¥ and the expected rate one year in the future is $1.2/¥, so $100 today can be exchanges for ¥100. Which currency deposit yield a higher expected rate of return (which currency investors should be willing to hold)? Why?
2. Complete the following table specifying the under and over valuation for each set of currencies. Show all your procedure for each answer: Real E.R. Theoretical E.R. % of % of Undervaluation Overvaluation (specify currency) (specify currency) USD 1.14 / EUR USD 1.52 / Punt TRY 4.85 / USD MXP 17.90 / USD USD 0.012 / JPY ¥ GBP {0.629 / USD USD 1.70 /EUR USD 1.50 / Punt TRY 4.73 / USD MXP 18.15 / USD USD 0.019/ JPY ¥ GBP (0.613/USD

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