Question
In: Finance
Assume the following information Current spot rate of New Zealand dollar = $0.41 Forecasted spot rate...
Assume the following information
| Current spot rate of New Zealand dollar | = | $0.41 |
| Forecasted spot rate of New Zealand dollar 1 year from now | = | $0.43 |
| One-year forward rate of the New Zealand dollar | = | $0.44 |
| Annual interest rate on New Zealand dollars | = | 8% |
| Annual interest rate on U.S. dollars | = | 9% |
Given the information in this question, the return from covered interest arbitrage by U.S. investors with $675,000 to invest is about _______in decimal.
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Assume the following information Current spot rate of New Zealand dollar = $0.41 Forecasted spot rate...
Assume the following information
Current spot rate of New Zealand dollar
=
$0.41
Forecasted spot rate of New Zealand dollar 1 year from now
=
$0.43
One-year forward rate of the New Zealand dollar
=
$0.42
Annual interest rate on New Zealand dollars
=
0.075
Annual interest rate on U.S. dollars
=
.09
Given the information in this question, the return from covered
interest arbitrage by U.S. investors with $479,000 to invest is
about ________.
3. Assume the following information: Current spot rate of Australian dollar = $.86 Forecasted spot rate...
3. Assume the following information: Current spot rate of
Australian dollar = $.86 Forecasted spot rate of Australian dollar
1 year from now = $.88 1-year forward rate of Australian dollar =
$.93 Annual interest rate for Australian dollar deposit = 4% Annual
interest rate in the U.S. = 2% What is your percentage return from
covered interest arbitrage with $650,000?
Assume the current U.S. dollar-British spot rate is $1.3063=£. If the current nominal one-year interest rate...
Assume the current U.S. dollar-British spot rate is $1.3063=£.
If the current nominal one-year interest rate in the U.S. is 1.5%
and the comparable rate in Britain is 0.75%, what is the
approximate forward exchange rate for 90 days?
8.5.1
Assume that the current spot rate for the Canadian dollar is 0.71 USD per C$. How...
Assume that the current spot rate for the Canadian dollar is
0.71 USD per C$. How will the Canadian dollar (C$) spot rate adjust
over the next year according to Purchasing Power Parity (PPP),
given the following information. That is, according to PPP, what is
the expected appreciation/depreciation in the Canadian dollar over
the next year AND what is the expected future spot
rate of the Canadian dollar one year from now? Use the information
in the table below to...
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?
assume the Canadian dollar spot rate is 1.18c$/us$, the swiss spot rate is 1.29CHF/us$ and the...
assume the Canadian dollar spot rate is 1.18c$/us$, the swiss
spot rate is 1.29CHF/us$ and the market cross rate is 1.11 chf/c$
a. calculate the implied cross-rate of CHF/c$ b calculate the
triangular arbitrage profit, assume you have us$1000 to work
with
Use the following information on the U.S. dollar value of the euro. Spot Rate Forward Rate...
Use the following information on the U.S. dollar value of the
euro.
Spot Rate
Forward Rate for
April 30, 2021 Delivery
October 30, 2020
$ 1.230
$ 1.240
November 1, 2020
1.248
1.245
December 31, 2020
1.260
1.265
April 30, 2021
1.270
1.270
On October 30, 2020, a U.S. company receives a purchase order from
a customer in Spain. Under the sale terms, the customer will pay
the company €100,000 on April 30. On October 30, the U.S. company
also...
Part III: Interest Rate Parity and Covered Interest Arbitrage Assume the following information: Current spot rate...
Part III: Interest Rate Parity and Covered Interest
Arbitrage
Assume the following information:
Current spot rate of Australian
dollar
=
$.65
Forecasted spot rate of Australian dollar 1 year from now
=
$.69
1-year forward rate of Australian dollar
=
$.68
Annual interest rate for Australian dollar deposit
=
5%
Annual interest rate in the United States
=
8%
According to Interest Rate Parity, is the covered interest
arbitrage feasible to U.S. investors and Australian investors?
Please explain your answers...
Assume the following information: One-year interest rate in New Zealand 5 percent One-year interest rate in...
Assume the following information:
One-year interest rate in New Zealand
5 percent
One-year interest rate in U.S
12 percent
Spot rate NZ$
$0.60
Forward rate NZ$
$0.54
initial investment of $10,000,000 (US (NZ) dollars for US (NZ)
investor
Is covered interest rate possible for US investors? New Zealand
investors? Explain why covered interest rate arbitrage is or is not
feasible.
Suppose that the current spot exchange rate between the US dollar and NZ dollar is $.70/NZ$...
Suppose that the current spot exchange rate between the US
dollar and NZ dollar is $.70/NZ$ and the 1-year forward rate is
$.695. The one year interest rates are 1% for the USD and 3% for
the NZ$. What is the payoff if a US MNC conducts covered interest
arbitrage, for a $1,000,000 starting amount?
1,022,643
$1,010,000
$985,857
$1,000,540
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