Suppose that the one-year U.S. interest rate is 8% and the equivalent one-year India interest rate is 12%. According to approximate covered interest parity, is there a forward premium, forward discount or forward flat on the dollar?
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- You are given that the annual Australian dollar interest rate is 1% and the United States annual interest rate is 2.5%. The spot rate for the United States dollar is SA1.20. (a) Using interest rate parity, calculate the forward rate premium of the United States dollar with respect to the Australian dollar. (b) Using your answer to (a), calculate the onc-ycar forward rateThe $/£ spot rate is $1.60/£1. The UK interest rate is 4% and the US interest rate is 9%. Calculate the one year forward rate using the covered interest parity formula. State if the pound is at a forward discount or at a forward premium, and why.a) A stock sells for $125. A call option on the stock has an exercise price of $110 and expires in 3 months. If the interest rate is 0.15 and the standard deviation of the stock's return is 0.30. What would be the price of a put option on the same stock with an exercise price of $140 and the same time (3 months) until expiration? Show all workings. (See Appendix for the Cumulative Normal Distribution Table)
- Assume that the spot rate for the US Dollar is ZMW24, while the 180-day forward rate for the Zambian Kwacha is ZMW24.4. What is the forward rate premium?Suppose the interest rate in Japan is 2% p. a. and the interest rate in the US is 3.6% p. a. What is the (approximate) forward premium for the yen?Suppose that the annual interest rates on 6-months borrowing in Romania and the United States are 12.7 % and 0.8 %, respectively. The current spot rate RON/US$ is 4.00 and 6-months forward rate RON/US$ is 4.21. Does interest rate parity hold?
- Assuming that existing U.S. one year interest rate is 8% and the Canadian one-year interest rate is 9%. Also assume that interest rate parity exists. Should the forward rate of the Canadian dollar exhibit a discount or a premium? If U.S. investors attempt covered interest arbitrage, what will be their return? If Canadian investors attempt covered interest arbitrage what will be their return?Assume that interest rate parity holds. The Mexican interest rate is 50 percent, and the U.S. interest rate is 8 percent. Subsequently, the U.S. interest rate decreases to 7 percent. According to interest rate parity, the peso's forward ____ will ____. a. premium; increase b. discount; decrease c. discount; increase d. premium; decrease can you give the steps and whyAssume 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
- Suppose that the U.S. interest rate on one year Treasury notes was 4.7%. We will use this as the annual interest rate in the U.S. And suppose that the interest rate on the one-year German Treasury note was 4.2%. The spot rate is 1.0162 EUR/USD. And the 3-month forward rate is 1.0188 Eur/USD. Is there an opportunity for covered interest arbitrage? If so, what would be the total profit if we borrowed $25 million? OA YES-$27,395.21 would be the profit OB. YES-$33,385.41 would be the profit OC. YES-$37,342.89 would be the profit OD. NO- there is no opportunity for a profitAssume that interest rate parity holds. The U.S. four-year interest rate is 5% annualized, and the Indian four-year interest rate is 8% annualized. Today's spot rate of the Indian rupee is $.14. What is the approximate four-year forecast of the rupee's spot rate if the four-year forward rate is used as a forecast? A. $.174. B. $.262. C. $.125. D. $.226. E. $.115.Suppose that the annual interest rates on 6-months borrowing in Romania and the United States are 12.7 % and 0.8 %, respectively. The current spot rate RON/US$ is 4.00 and 6-months forward rate RON/US$ is 4.21. Would it be as a result of covered/uncovered interest arbitrage?