Here are today’s rates: Spot exchange rate: 3.20 Polish zloty per U.S. dollar 6-month forward exchange rate: 3.24 Polish zloty per U.S. dollar. You expect the spot exchange rate in 6 months to be 3.26 Polish zloty per U.S. dollar. Evaluate the validity of the following statement: “Given this information, you will profit from a forward exchange speculative position based on your expected future spot exchange rate, if the actual future spot exchange rate in 6 months is 3.25 zloty per U.S. dollar.”

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?

Suppose the U.S. yield curve is flat at 5% and the euro yield curve is flat at 3%. The current exchange rate is $1.25 per euro. What cash flows will be exchanged on a 4-year foreign exchange swap with notional principal of 260 million euros (or equivalently, at current exchange rates, $325 million)? Note: Do not round intermediate calculations. Enter your answer in dollars not millions rounded to the nearest dollar value. Swap rate ......... per year

Nikul

Suppose the current exchange rate for the Polish zloty is Z3.3. The expected exchange rate in 5 years. The expected exchange rate in 5 years is Z3.56. What is the difference in the annual inflation rates for the United States and Poland over this period? Assume that the anticipated rate is constant for both countries.

An investor based in the US invests $1,200 in Mexico and this generates a future value in one year of $1,344.44, US. If the interest rate in Mexico is 10% and the future expected exchange rate is Et41 = 5.4, this implies that the current exchange rate must be O 5.25 O 5.7 O 4.85 O 5.5

Suppose you have the following spot exchange rates:   USD/AUD 0.5300 AUD/EUR 1.6428 USD/EUR 0.8782   a) Calculate the US dollar profit (per 1 USD), if any, on a three-point arbitrage.    b) Calculate AUD profit (per 1 AUD), if any, on a three-point arbitrage.   c) How can you explain the answers in (1) and (2)?

The US 1 year spot rate is 3.61% and the Mexican 1 year spot rate is 7.44%. A US investor purchases a Mexican corporate bond with an expected 1 year return of 9.76%, as measured in Mexican peso. The current USD/MXP exchange rate is 0.18. If the investor decides to hedge the currency risk exposure in the forward market, what would be the expected return on this portfolio, if interest rate parity holds?

Suppose that the annualized inflation in the US is 3% while annual inflation in Europe is 1%. If the current exchange rate is $1.40 per Euro that would you expect the exchange rate to be in one year? If the exchange rate one year from now turns out to be $1.50 per Euro, what has happened to the real exchange rate?

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/$