Consider the following table. There are two countries and two goods. Assume both countries have the same price table: Time t t+1 P1 $8 $10 P2 $4 $5   a. Assume commodity price parity. What is the foreign currency price of the two goods at the two points in time? What is the domestic inflation rate? What is the foreign inflation rate. b. Suppose PPP is known to hold as is covered interest parity between two countries. What determines any differences between the expected real returns on risk free interest bearing assets in the two countries?

Assume that interest rates in the USA are 7.5% and in China are 3.5%. According to the Interest Rate Parity (IRP):a. what will be the PREMIUM or DISCOUNT of the forward rate? b. If the SPOT exchange rate of the Chinese Yuan (CNY) is 0.159177 dollars (USD) per Yuan (CNY), what will be the forward exchange rate in one year of the Yuan (CNY)?The alternatives are:a. Premium of 3.864734% and Forward exchange rate 0.165328768 CNY/USD.b. Premium of 3.864734% and Forward exchange rate 0.165328768 USD/CNYc. Discount of 3.72093% and Forward Exchange Rate 0.153254135 CNY/USDd. Discount of 3.72093% and Forward Exchange Rate 0.153254135 USD/CNYPlease detail each of your calculations

Calculate the possible rate for buying GBP (Great Britain Pound) in exchange for selling JPY as well as the possible rate for selling GBP in exchange for buying JPY. Assume that the exchange rates are quoted as follows: USD 1 = JPY 104.50-104.60, GBP 1 = USD 1.3260 – 1.3265.

Suppose the exchange rate between U.S. dollars and British Pounds is $1.00 = 1.56 Pounds and the exchange rate between the U.S. dollar and the Euro is $1.00 = 1.15 Euros.  What is the direct quote cross rate of one Pound to the euro? (How many Euros will one Pound purchase?) Instruction: Type your answer in euros, and round to two decimal places

Suppose that the interest rates in the U.S. and Germany are equal to 5%, that the forward (one year) value of the € is F$/€ = 1$/€ and that the spot exchange rate is E$/€ = 0.75$/€. Please answer the following questions by explaining all steps of your analysis: Does the covered interest parity condition hold? Why or why not? How could you make a riskless profit without any money tied up assuming that there are no transaction costs in buying and or selling foreign exchange? PLEASE SHOW ALL STEPS

Suppose the Japanese yen exchange rate is ¥116/$ and the British pond exchange rate is $1.27/£. a) What is the yen to pound cross-rate? b) Suppose that a bank gives you a quote of ¥156/£. Is there an arbitrage opportunity here? If so, explain how to take advantage of the mispricing.

If the euro is selling at a discount relative to the USD in the forward market, is the forward price of USD/EUR larger or smaller than the spot price of the USD/EUR? Group of answer choices a Larger b Smaller c Indeterminate d The same

Given S(USD/AUD) = 0.7899, the price of a consumption basket in the US is$100 and the price of the same basket in Australia is $120. What is the real exchangerate and is it higher or lower than the nominal exchange rate?

Which of the following best describes the terms 'long forward position' and 'short forward position' in foreign exchange trading?   A short forward position is holding a currency for a short duration, while a long forward position is holding it for a longer period.   A short forward position means you have agreed to sell a currency in the future, while a long forward position means you have agreed to buy it in the future.   A long forward position is when you expect the currency's future spot rate to decrease, and a short forward position is when you expect it to increase.   A long forward position means you have agreed to sell a currency in the future, and a short forward position means you have agreed to buy it in the future.

Suppose the Japanese yen exchange rate is ¥122 = $1 and the British pound exchange rate is £1 = $1.53. Suppose the cross-rate is ¥140 = £1. If there is, what would be the profit of the mispricing?