Suppose the Dollar Interest Rate and the Pound Sterling Interest Rate are the same percent per year. What is the relation between the Current Equilibrium $/£ Exchange R and its Expected Future level? Suppose the Expected Future $/ Exchange Rate, $1.52; pound, remains constant as Britain's Interest Rate rises to 10 percent per year. If the U Interest rate also remains constant, what is the New Equilibrium $/ Exchange Rate?

Assume the spot rate on the New Zealand dollar is NZ$1.0926, the risk-free nominal rate in the U.S. is 3.8 percent and 4.1 percent in New Zealand. What is the four-year forward rates best establishes the approximate interest rate parity condition?

A)  It is now January. The current interest rate is 5% per annum annual compounding. The June future price for gold is $1846.30, while the December future rice is $1860.00. Find a strategy to explore the arbitrage opportunity. B) Suppose that the spot price of the euro is currently $1.5 USD. The one-year futures price is $1.55 USD. Is the interest rate higher in the United States or the euro zone? Justify your answer. C) OneAsx has just introduced a single-stock futures contract on Arandex stock, a company that currently pays no dividends. Each contract calls for delivery of 1,000 shares of stock in one year. The T-bill rate is 6% per year annually compounded and Arandex stock currently sells at $120 per share. If the Arandex price drops by 3%, what will be the change in the future price and the change in the investors’ margin account who has a long position in one contract?

4. An American put option to sell a British pound for dollars has a strike price of $1.5 and a time to maturity of 1 year. The volatility of the pound/dollor exchange rate is 15% per annum, the dollar interest rate is 6%, the British pound interest rate is 7%, per annum, and the current exchange rate is 1.52. Use a three-step binomial tree to value the option.

Suppose the spot price of the British pound is currently $1.50. If the risk-free interest rate on one-year government bonds is 4% in the United States and 3% in the United Kingdom, what must the forward price of the pound be for delivery one year from now? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Assume that interest rate parity holds and that 90-day risk-free securities yield 3% in the United States and 3.3% in Germany. In the spot market, 1 euro equals $1.50. What is the 90-day forward rate?