The 6-month forward discount for converting the U.S. dollar into the British pound is 1.34% and...

The 6-month forward discount for converting the U.S. dollar into the British pound is 1.34% and 6-month U.S. Treasury bills yield 1.56%. Based on interest rate parity, what should be the 6-month British Treasury bill yield?

	A.	.22%
	B.	-.78%
	C.	2.9%
	D.	3.1%

Expert Solution

a. British Yield = [(1 + US interest rate) / (1 + British Interest rate)] - 1

British Yield = [(1.0134) / (1.0156)] - 1

British Yield = 1.0022 - 1

British T-Bill Yield = 0.22% Option A

jeff jeffy answered 2 years ago

5 pts)The 6-month forward discount for converting the U.S. dollar into the British pound is 34%...

5 pts)The 6-month forward discount for converting the U.S. dollar into the British pound is 34% and 6-month U.S. Treasury bills yield 1.56%. Based on interest rate parity, what should be the 6-month British Treasury bill yield? (10 pts)The current exchange rate is one Australian dollar (AUD) equal to 1.349 USD. In the United States, the 6 months T-bill rate is 84%. The 6-month forward rate for AUD is .75 USD/AUD. Assuming that interest rate parity exists, what is the implied interest...

The New Zealand dollar to U.S. dollar exchange rate is 1.34 , and the British pound...

The New Zealand dollar to U.S. dollar exchange rate is 1.34 , and the British pound to U.S. dollar exchange rate is .63. If you find that the British pound to New Zealand dollar were trading at .51 , what would be the riskless profit per U.S. dollar invested?

what are the british pound vs U.S dollar advantages and disadvantages?

If the British pound depreciates against the U.S. dollar Select one: A. British consumers lose by...

If the British pound depreciates against the U.S. dollar Select one: A. British consumers lose by a decrease in the pound price of U.S. exports to Britain. B. British consumers gain by a decrease in the pound price of U.S. exports to Britain. C. British businesses gain by an increase in the dollar price of exports to the United States. D. U.S. consumers win by a decrease in the dollar price of British exports to the United States.

If the British pound depreciates against the U.S. dollar Select one: British businesses gain by an...

If the British pound depreciates against the U.S. dollar Select one: British businesses gain by an increase in the dollar price of British exports to the United States. British consumers lose by an increase in the pound price of U.S. exports to Britain. British consumers gain by a decrease in the pound price of U.S. exports to Britain. U.S. consumers lose by an increase in the dollar price of British exports to the United States.

Quotes for the Dollar against the British pound: 0.7855 – 0.7925 Quotes for the British pound...

Quotes for the Dollar against the British pound: 0.7855 – 0.7925 Quotes for the British pound against the dollar: 1.4475- 1.4755. 1) Which market would you use of you want to BUY dollars? 2) Which market would you use if you want to SELL dollars?

The pre-1914 value of the British pound to the U.S. dollar was $4.87. (To purchase one...

The pre-1914 value of the British pound to the U.S. dollar was $4.87. (To purchase one pound, one had to pay $4.87.) Following World War I, if the dollar had traded for the pound on an open currency market, the value would have been about $3.50. However, the British government insisted that the pound trade at its pre-war value to the U.S. dollar. Under such an arrangement: 1. Would Great Britain run annual trade surpluses or trade deficits with the...

The current dollar−pound exchange rate is $2 per British pound. A U.S. basket that costs $100...

The current dollar−pound exchange rate is $2 per British pound. A U.S. basket that costs $100 would cost $140 in the United Kingdom. For the next year, the U.S. Fed is predicted to keep U.S. inflation at 2% and the Bank of England is predicted to keep U.K. inflation at 3%. The speed of convergence to absolute PPP is 15% per year. 1. (Scenario: Monetary Approach in the Long-run) What is the current U.S. real exchange rate with the United...

3) Consider the supply-demand framework for the British pound relative to the U.S. dollar shown in...

3) Consider the supply-demand framework for the British pound relative to the U.S. dollar shown in the chart. The equilibrium exchange rate based on both the supply (S) and the demand (D) is $1.90/£. Please ignore the demand curve D’. However, if the current market exchange rate is $1.80/£, does the U.S experience the trade deficit or surplus with the U.K. Moreover, explain your answer based on both the demand and the supply for the pound. (30points

Question 45 (3 point) If the exchange rate between the U.S. dollar and the British Pound...

Question 45 (3 point) If the exchange rate between the U.S. dollar and the British Pound is $1.66 per Pound, then what is the Pound per dollar exchange rate? (Express your answer as xx.xx.) Your Answer: If the exchange rate between the U.S. dollar and the Euro is $1.72 per Euro and the exchange rate between the U.S. dollar and the Japanese yen is 108.36 Yen per dollar, then what is the Yen per Euro exchange rate? Your Answer: If...

Question