Suppose that the Euro-denominated interest rate is 1.5%, the dollar- denominated interest rate is 1%, and...

Suppose that the Euro-denominated interest rate is 1.5%, the dollar-
denominated interest rate is 1%, and the current exchange rate is 1.42 dollars per
Euro. What is the 6-month forward exchange rate in Vancouver (i.e., C$ per 1
Euros)? What is the 6-month forward exchange rate in Milan (i.e., Euros per 1
C$)? [Assume that interest rates are annualized and continuously compounded.]

Expert Solution

6-month forward exchange rate in Vancouver = spot exchange rate of C$ per 1 Euros * e^r_dt / e^r_et

where r_d = dollar interest rate (this is 1%, or 0.01)

r_e = euro interest rate (this is 1.5%, or 0.015)

t = time in years (this is 6/12, or 0.5)

6-month forward exchange rate in Vancouver = 1.42 * e^(0.1*0.5) / e^(0.015*0.5)

6-month forward exchange rate in Vancouver = C$4.4165 per 1 Euro

6-month forward exchange rate in Milan = spot exchange rate of Euro per 1 C$ * e^r_et / e^r_dt

where r_d = dollar interest rate (this is 1%, or 0.01)

r_e = euro interest rate (this is 1.5%, or 0.015)

t = time in years (this is 6/12, or 0.5)

spot exchange rate of Euro per 1 C$ = 1 / spot exchange rate of C$ per 1 Euros = 1 / 1.42 = 0.704225

6-month forward exchange rate in Milan = 0.704225 * e^(0.015*0.5) / e^(0.1*0.5)

6-month forward exchange rate in Milan = 0.7060 Euros per 1 C$

jeff jeffy answered 6 months ago

if the interest rate is 7% on euro-denoninated assets and 5 percent on dollar denominated assets,and...

if the interest rate is 7% on euro-denoninated assets and 5 percent on dollar denominated assets,and if ten dollar is expected to appreciate af a 4 percent rate, for Tom the American the expected rate of return in dollar -denominated assets is?

Suppose the exchange rate is $0.61/A$, the Australian dollar-denominated continuously compounded interest rate is 2%, the...

Suppose the exchange rate is $0.61/A$, the Australian dollar-denominated continuously compounded interest rate is 2%, the U.S. dollar-denominated continuously compounded interest rate is 6%, and the exchange rate volatility is 19%. What is the Black-Scholes value of a 3-month $0.60-strike European call on the Australian dollar? $.0315 = Answer Please show all the work THanks

If the interest rate on euro-denominated assets is 13 percent and it is 15 percent on peso-denominated assets

Question 18 If the interest rate on euro-denominated assets is 13 percent and it is 15 percent on peso-denominated assets, and if the euro is expected to appreciate at a 4 percent rate against peso, for Manuel the Mexican the expected rate of return on euro-denominated assets is _______% Question 19According to the purchasing power parity theory, a rise in the United States price level of 5 percent, and a rise in the Mexican price level of 6 percent cause the dollar...

Suppose the spot $/Yen exchange rate is 0.008, the 1-year continuously compounded dollar- denominated rate is...

Suppose the spot $/Yen exchange rate is 0.008, the 1-year continuously compounded dollar- denominated rate is 5% and the 1-year continuously compounded yen-denominated rate is 1%. Suppose the 1-year forward exchange rate is 0.0084. Explain precisely the transactions you could use (being careful about currency of denomination) to make money with zero initial investment and no risk. What is such a strategy being referred to in the markets?

Suppose the U.S. dollar-euro exchange rate is 1.1 dollars per euro, and the U.S. dollar-Mexican peso...

Suppose the U.S. dollar-euro exchange rate is 1.1 dollars per euro, and the U.S. dollar-Mexican peso rate is 0.1 dollars per peso. What is the euro-peso rate? ____ euros per Mexican peso. (Enter your response rounded to three decimal places.)

Please show steps to question 1 1) The euro/pound exchange rate is €1.5/£, while the euro/yen...

Please show steps to question 1 1) The euro/pound exchange rate is €1.5/£, while the euro/yen exchange rate is €.004/¥. You also observe that the pound/yen cross exchange rate is £.003/¥. Find the triangular arbitrage profit (in euros) available to someone that has access to €500,000 at an interest rate of 3%. Round intermediate steps to four decimals and your final answer to two decimals. Do not use currency symbols when entering your answer. 2) Which of the following would...

A spot exchange rate for the Euro / U.S. Dollar is 363.00 £/$.What’s the 1-month...

A spot exchange rate for the Euro / U.S. Dollar is 363.00 £/$. What’s the 1-month forward mid-rate ( £/$) when the quotes are an ask of -325? bid of -125?

QUESTION 1 Suppose the euro was worth $1.25 in 2016. In 2017, a dollar was worth...

QUESTION 1 Suppose the euro was worth $1.25 in 2016. In 2017, a dollar was worth .90 pounds. Find the percentage appreciation/depreciation of the dollar from the British point of view. A) -.1250 B) .1111 C) -.1111 D) .1250 QUESTION 2 2/17 2/18 2/19 £.8/$ $1.30/£ £.9/$ ¥125/$ ¥122/$ $.007/¥ €1.1/$ €/$.85 $.95/€ What is the percentage appreciation/depreciation of the Euro from the US point of view from 2/17 to 2/18? Round intermediate steps and your final answer to four...

The euro currently trades at $1.0231. The dollar risk-free rate is 4 percent, and the euro...

The euro currently trades at $1.0231. The dollar risk-free rate is 4 percent, and the euro risk-free rate is 5 percent. Six-month forward contracts are quoted at a rate of $1.0225. Indicate how you might earn a risk-free profit by engaging in a forward contract. Clearly outline the steps you undertake to earn this risk-free profit.

The three-month dollar interest rate in New York is 3.80% per annum. Alternatively, the three-month euro...

The three-month dollar interest rate in New York is 3.80% per annum. Alternatively, the three-month euro interest rate in Frankfort is 5.40% p.a. The current $/€ spot exchange rate is $1.1220/€. The euro three-month forward rate is quoted at $1.1210/€. Use the International Fisher Effect (IFE) to find what should be the expected three-month spot exchange rate of dollars against the euro (If not performing chain calculations, use interest rates up to four decimal places, and again use the proper...

Question