International Fischer Forecasts. Assuming International Fisher applies to the coming year, forecast the following future spot exchange rates using the government bond rates for the respective country currencies: a. Japanese yen/U.S. dollar in one year b. Japanese yen/Australian dollar in one year c. Australian dollar/U.S. dollar in one year

International Fischer Forecasts. Assuming International Fisher applies to the coming year, forecast the following future spot exchange rates using the government bond rates for the respective country currencies: a. Japanese yen/U.S. dollar in one year b. Japanese yen/Australian dollar in one year c. Australian dollar/U.S. dollar in one year

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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The spot rate for the Argentine peso is $0.3600 per peso. Over the year inflation in Argentina is 10% and U.S. inflation is 4%. If purchasing power parity holds, at year-end the exchange rate should be approximately ______________ dollars per Real. A. 0.2875 B. 0.2987 C. 0.3384 D. 0.3614
Today's spot exchange rate: 1 euro = $1.25.US interest rate (home interest rate) is 7%.EU interest rate (foreign interest rate) is 10%.a) If the IRP (Interest rate parity) holds, what should the forward exchange rate be today?b) Assume that today, you invest $500 in the EU market for one year and at the same time, enter a currency forward contract to sell euro in a year at the forward rate from part a). If today's spot exchange rate is: 1 euro=$1.32 instead of $1.25, show how much profits or losses you make next year.
The following table reports the nominal exchange rate of the US dollar against two other American currencies (Canadian dollar and Mexican pesos) on 31/12/2021. It also presents the inflation rates' forecasts for the next 1-year period (estimated by the OECD), as well as the 1- year government bond yield (in %) for both countries. Exchange rate Inflation rates' forecasts (%) 1-year government bond yield (%) USA 4.78 0.38 - Canadian dollar (CAD) 1.27 3.25 0.76 Mexican peso (MXN) 20.46 4.43 6.92 Mr. Garamond, the owner of a small publishing house in Bologna, plans to invest 2.5 million euros for one year, and he thinks to buy either a US bond with interest rate 0.38% or an Italian bond with interest rate -0.49%. Note also that today's euro nominal exchange rate per $ equals 0.876. i. If Mr. Garamond expects annual appreciation of the euro by 3.5%, what will be his choice? Comment on your answer ii. Which expectations' scheme regarding the exchange rate will make Mr. Garamond indifferent…
Assume that you believe that purchasing power parity (PPP) holds. You are an Australian investor with 225,000 AUD to invest for the next year. The current exchange rate is AUD/EUR 0.62. The expected inflation in Germany is 1.3% while the expected inflation in Australia is 3.6%. Current interest rates in Germany are 0.5% and in Australia 4.1%. What is your expected yield on a German investment? 4.1% 5.9% O 0.5% 2.8% None of the other options are correct
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Use the following information for the next 2 questions. Assume that the U.S. one-year interest rate is 8% and the one-year interest rate on Australian dollars is 13%. The U.S. annual inflation is expected to be 5%, while the Australian annual inflation is expected to be 7%. The current spot exchange rate of an Australian dollar is $0.689. You have $100,000 to invest for one year. Question 4 (6.25 points) You believe that IFE holds. What will be the yield on your investment if you invest in the Australian market? (HINT: You believe that IFE holds, so the spot rate one year later is the rate obtained from IFE. Note that the interest rate given in the problem is the nominal rate.) 13.00% 8.00% 18.23% 7.16%
3. The expected inflation rate in Oman is 3.5%. The current spot rate between OMR and INR is INR174.325/OMR and the expected spot exchange rate in one year is INR176.435/OMR. How much is the expected inflation rate in India?
Facing the increasing interest rate of the U.S. that will be even higher in the next several months, what is the trend of the exchange rate of your home country? If your home country runs a fixed exchange rates regime, what suggestions can you provide to the monetary authority?
Assume that the Mexican peso currently trades at 11 pesos to the U.S. dollar. During the year U.S. inflation is expected to average 4%, while Mexican inflation is expected to average 5%. What is the current value of one peso in terms of U.S. dollars? Given the relative inflation rates, what will the exchange rates be 1 year from now? Which currency is expected to appreciate and which currency is expected to depreciate over the next year? The current value of one Mexican peso in terms of U.S. dollars, USS, is US$/MP. (Round to six decimal places.) Given the relative inflation rates, the exchange rate of one U.S. dollar in terms of Mexican pesos, MP, one year from now will be MP/US$. (Round to six decimal places.) Given the relative inflation rates, the exchange rate of one Mexican peso in terms of U.S. dollars, US$, one year from now will be US$ /MP. (Round to six decimal places.) ▼is expected to appreciate, while the is expected to depreciate over the next year. (Select from the…
please help me solve this. Explain to me step by step how to find the answer
Suppose you observe the following spot and forward exchange rates between the U.S. dollar ($) and the Canadian dollar (C$): Spot Exchange Rate One-Year Forward Exchange Rate Canadian dollar (U.S. dollar/Canadian dollar) 0.8842 0.9001 The current one-year interest rate on U.S. Treasury securities is 6.89%. If interest rate parity holds, what is the expected yield on one-year Canadian securities of equal risk? 4.75% 4.00% 5.00% 5.75%
Assume the following information: Spot rate of U.S. dollar Quoted Price AUD1.2500/USD 180-day forward rate of U.S. dollar 180-day Australian interest rate (a periodic rate) 180-day U.S. interest rate (a periodic rate) AUD1.2800/USD 4.75% 3.10% A. What USD-denominated percent rate of return can a US investor earn if they attempt covered interest arbitrage? (to two decimal places like 6.54%) B. What AUD-denominated percent rate of return can an Australian investor earn if they attempt covered interest arbitrage? (to two decimal places like 6.54%) C. Given this information, who has a covered interest arbitrage opportunity? Answer either "Australian investors" or "U.S. investors". D. What changes in the 2 quoted prices above would likely occur to eliminate any further possibilities of covered interest arbitrage? (answer with just or 1) Spot rate of U.S. dollar 180-day forward rate of U.S. dollar

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