Interest Rate Parity The nominal yield on 6-month T-bills is 6%, while default-free Japanese bonds that mature in 6 months have a nominal rate of 3.5%. In the spot exchange market, 1 yen equals $0.012. If interest rate parity holds, what is the 6-month forward exchange rate? Do not round intermediate calculations. Round your answer to five decimal places.
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- Six-month T-bills have a nominal rate of 3%, while default-free Japanese bonds that mature in 6 months have a nominal rate of 1.45%. In the spot exchange market, 1 yen equals $0.009. If interest rate parity holds, what is the 6-month forward exchange rate? Do not round intermediate calculations. Round your answer to six decimal places.The nominal yield on 6-month T-bills is 6%, while default-free Japanese bonds that mature in 6 months have a nominal rate of 3%. In the spot exchange market, 1 yen equals $0.011. If interest rate parity holds, what is the 6-month forward exchange rate? Do not round intermediate calculations. Round your answer to five decimal places.Suppose that the annual interest rates on 6-months borrowing in Romania and the United States are 12.7 % and 0.8 %, respectively. The current spot rate RON/US$ is 4.00 and 6-months forward rate RON/US$ is 4.21. Does interest rate parity hold? Would it be as a result of covered or uncovered interest arbitrage, why? Determine arbitrage potential in b) using spot rate after six months of RON/US $= 4.25 rather than 6-months forward rate.
- The six-month interest rate of Austrilian dollar is 9 percent while the six-month interest rate for US dollar is 6.75 percent. At the same time, the spot Austrilian dollar quotation in New York is US$0.9100 and the six-month forward rate is US$0.9025. Analyse the information provided above to answer the following questions: i) Critically evaluate whether there is interest rate parity in this situation. Provide relevant calculations to support your answer. ii) Critically discuss whether, and how, it might be possible to make a profit in this situationAssume that inflation in the United States is 9% and inflation in Europe is 6%. If the spot rate has changed by 9.57% then the percentage change in the real exchange rate (expressed as USD/EUR) is Notes: Round your intermediate and final answer to four decimal places. You should enter your answer in percent form (Le 5% not 0.05). Type your answer.. Previous NextUse the information below to answer the following questions. Currency per U.S. $ 1.2380 1.2353 Australia dollar 6-months forward Japan Yen 6-months forward U.K. Pound 6-months forward 100.3600 100.0200 .6789 .6784 Suppose interest rate parity holds, and the current six month risk-free rate in the United States is 5 percent. Use the approximate interest rate parity equation to answer the following questions. a. What must the six-month risk-free rate be in Australia? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What must the six-month risk-free rate be in Japan? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Australian risk-free rate b. Japanese risk-free rate c. Great Britain risk-free rate c. What must the six-month risk-free rate be in Great Britain? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) % % %
- Six-month T-bills have a nominal rate of 2%, while default-freeJapanese bonds that mature in 6 months have a nominal rate of 1.25%. In the spot exchangemarket, 1 yen equals $0.0091. If interest rate parity holds, what is the 6-month forwardexchange rate?An exchange rate is 0.7000 and the six‐month domestic and foreign risk‐free interest rates are 5% and 7% (both expressed with continuous compounding). What is the six‐month forward rate? a) 0.7070 b) 0.7177 c) 0.7249 d) 0.6930If spot rate is USD2.5968/OMR and interest rate for USD is 2% per annum. One-year forward exchange rate is USD 2.6008/OMR. If interest rate parity holds and USD is the Home currency, then calculate the interest for OMR? 1.8431% 0.021571% 2.1571% 0.018431%
- The domestic currency price of a unit of foreign currency 0.70 and the domestic and foreign risk-free interest rates are 5% and 7% respectively (assume discrete compounding). What is the 18-month forward rate (rounded to the nearest cent)? a. 0.70 b. 0.74 c. 0.68 d. 0.72Suppose the risk free rate in pounds is 5.12% and the risk free rate in US dollars is 7.71%. The current £ to $ exchange is 1.43. You and a broker want to agree an exchange rate now for a £ to $ conversion, but where the money will be exchanged in precisely 36 months time. What exchange rate (£ to $) should you and your broker use to ensure there is no arbitrage? Give your answer to 2 decimal places.You observe the following current rates: Spot exchange rate: $0.01/yen. Annual interest rate on 90-day U.S. dollar–denominated bonds: 4%. Annual interest rate on 90-day yen-denominated bonds: 4%. a. If uncovered interest parity holds, what spot exchange rate do investors expect to exist in 90 days? b. A close U.S. presidential election has just been decided. The candidate whom international investors view as the stronger and more probusiness person won. Because of this, investors expect the exchange rate to be $0.0095/yen in 90 days. What will happen in the foreign exchange market?