Only typed answer and please don't use chatgpt  Suppose the interest rate on 6-month treasury bills is 7 percent per year in the United Kingdom and 4 percent per year in the United States. Also, today’s spot exchange price of the pound is $2.00 while the 6month forward exchange price of the pound is $1.98. By investing in U.K. treasury bills rather than U.S. treasury bills, and covering exchange-rate risk, U.S. investors earn an approximate extra return for 6 months of: a. 0.5 percent. (this is the answer; please show how to solve) b. 1.5 percent. c. 3.0 percent. d. 4.0 percent.

Consider an option to buy £10,000 for €12,500. In the next period, if the pound appreciates against the dollar by 37.5 percent then the euro will appreciate against the dollar by ten percent. On the other hand, the euro could depreciate against the pound by 20 percent. Big hint: don't round, keep exchange rates out to at least 4 decimal places. Sø ( $/ €) Sø ($/ £) SØ ( €/ £) Spot Rates $1.60 = €1.00 $2.00 = £1.00 €1.25= £1.00 Risk-free Rates i$ 3.00% i€ 4.00% if 4.00% If the call finishes out-of-the-money what is your replicating portfolio cash flow?

1. Heidi Hoi Jensen is now evaluating the arbitrage profit potential in the same market after interest rates change. (Note that any time the difference in interest rates does not exactly equal the forward premium, it must be possible to make a CIA profit one way or another). Arbitrage fund available Spot exchange rate (kr/S) 3-month forward rate (kr/S) U.S. dollar 3-month interest rate Danish kroner 3-month interest rate S5,000,000 6.1720 6.1980 4.000% 5.000%

Foreign Exchange Risk and the Cost of Borrowing Swiss Francs. The chapter demonstrated that a firm borrowing in a foreign currency could potentially end up paying a very different effective rate of interest than what it expected. Using the same baseline values of a debt principal of SF1.5 million, a one-year period, an initial spot rate of SF1.4700/5. a 5.148% cost of debt, and a 34% tax rate, what is the effective after-tax cost of debt for one year for a U.S. dollar-based company if the exchange rate at the end of the period was a. SF14700/$ b. SF1.4300/5 c. SF1.3980/ d. SF1.6050/5 GULD a. If the exchange rate at the end of the period was SF1.4700/5, what is the effective after-tax cost of debt? % (Round to four decimal places)