If the spot rate is $0.50/NZ$ and the formate rate is $0.55/NZ$. The intreste rate in USA is 9% and the intreste rate in New Zealand is 4%. What would be per doller benefit for the US investor from Investing in New Zealand bonds.
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If the spot rate is $0.50/NZ$ and the formate rate is $0.55/NZ$. The intreste rate in USA is 9% and the intreste rate in New Zealand is 4%. What would be per doller benefit for the US investor from Investing in New Zealand bonds.
A. $0.054 B. -$0.054 C. $0.090 D. $0.040
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- If the spot rate is $0.50/NZ$ and the forward rate is $0.55/NZ$. The interest rate in USA is 9% and the interest rate in New Zealand is 4%. What would be per dollar benefit for the US investor from investing in New Zealand bonds? a. $0.054 b. -$ 0.054 c. $0.090 d. $ 0.040a. In New Zealand, the one-year interest rate is 6%. The one-year interest rate in the United States is 10%. The New Zealand dollar (NZ$) has a spot rate of $.50. The New Zealand dollar has a forward rate of $.54. i. Explain if covered interest arbitrage can benefit US or New Zealand investors. i. Explain why covered interest arbitrage is or is not conceivable in each situation.Assume that the interest rate in the Japan is 6% and that the Yen is expected to depreciate by 2% against the Australian dollar during the year. For each Australian dollar that an Australian resident invests in Japanese bonds, he/she can expect to get back a total of: A. $1.24 B. $1.08 C. $1.14 D. $1.04 E. $0.84
- Suppose vou are a UK-based investor and the interest rate on investments in UK is 0.85% pa. and the interest rate for comparable investments in USTis 1.35% p.a. Suppose further that the spot rate is GBP 0.7267 /USD and that the quoted one-year forward rate by the bank is GBP 0.7195 /USDa.) If covered interest rate holds, Is there an arbitrage opportunity? Why?b.) If yes, how high is it if you were able to borrow USD twenty million at the above rates from a US bank for one year? Please state the gain in USD.Assume the following information: Spot rate of £ = $1.60 180-day forward rate of £ = $1.56 180-day British interest rate = 4% a. Based on this information, is covered interest arbitrage by US investors is possible (assuming that U.S. investors have $1,000,000)? If yes, Explain how to conduct it in your words. b. Suppose: 180-day US interest rate = 3%. Is the above strategy is feasible? Explain your %3D answer2. The Australian dollar - Japanese Yen exchange rate is currently given by $A 1= Yen 100. Australian Government 1-year bond rates are 2% while Japanese Government 1-year bond rates are 0.5%. Everything else being equal, Japanese currency investors should, a. Buy the $A, sell Japanese Government bonds and buy Japanese Yen b. Buy the $A, buy Japanese Government bonds and sell Japanese Yen c. Sell the $A, sell Australian Government bonds and buy Japanese Yen d. Sell the $A, buy Australian Government bonds and buy Japanese Yen
- As a US investor willing to invest $1,000,000 with the information given below: Spot rate of £ =$1.60 180-day forward rate of £ =$1.56 180-day British interest rate = 4% 180-day US interest rate = 3% Is the Covered Interest Arbitrage by the investor is feasible? Explain Does the Interest Rate Parity Condition exist given the above information?You are the financial manager for Belltower Associates, which is headquartered in Australia. You have received the below spot and interest rates quotes from your bank: Bid Ask NZD 0.8298/AUD NZD 0.8340/AUD 4.50% 5.00% 0.90% 1.30% Spot exchange rate Interest rate for AUD Interest rate for NZD Suppose that Belltower Associates has a receivable in NZD in one year's time and they wish to engage in a hedge to lock in their domestic (i.e. Australian dollar) currency equivalent of its value. Belltower Associates intends to achieve this by using their bank's spot rates and money market interest rates in order to create a synthetic forward contract. What is the effective forward exchange rate that Belltower Associates is able to achieve for hedging the AUD value of their NZD receivable? O a. NZD 0.8012/AUD O b. NZD 0.8635/AUD O c. O d. O e. NZD 0.8298/AUD NZD 0.8594/AUD NZD 0.7974/AUD NZD 0.8085/AUDThe next problem is about covered interest rate parity. Assume that the home country is the Philippines, and a Filipino investor is mulling whether or not to invest P1 million in the US or in the PH. Bonds in either country mature in just 1 year. The initial parameters are as follows: iPH ius = = 8% ● et+1 = 12% • et P50/USD = P55/USD Answer the following: • If the Filipino invests in a PH bond for 1 year, how much will she earn? • If the Filipino invests in a US bond for 1 year, how much will she earn in peso terms? • Is there a difference between the two values above? • How much did the peso depreciate/appreciate from time t to t + 1? • For the investor to be indifferent between investing here and abroad, she should engage in a forward exchange rate contract at what rate Fț?
- The spot rate between Canada and the U.S. is Can$1.2398/$, while the one-year forward rate is Can$1.2397/$. The risk-free rate in Canada is 4.31 percent and risk-free rate in the United States is 2.60 percent. How much in profit can you earn on $6,500 utilizing covered interest arbitrage? Multiple Choice $89.36 $110.60 $97.73 $124.43 $111.70 part B, The annual inflation rate in the U.S is expected to be 2.68 percent and the annual inflation rate in Poland is expected to be 4.21 percent. The current spot rate between the zloty and dollar is Z4.0992/$. Assuming relative purchasing power parity holds, what will the exchange rate be in four years? Multiple Choice Z4.2902/$ Z4.3559/$ Z3.8540/$ Z3.9139/$ Z4.2256/$Use the following interest rate assumptions: U.S. = 5.5% Euro = 7.5% If a U.S. firm borrows in euros, the euro would have to ____ against the dollar by ____ in order to have the same effective financing rate from borrowing dollars. Select one: a. depreciate; about 1.86% b. appreciate; about 1.93% c. appreciate; about 1.90% d. depreciate; about 1.93%You live in Australia and want to try to make some money through interest rate arbitrage abroad. You notice the following rates quoted online: Bid AUD1.1848/USD AUD1.2434/USD Spot exchange rate 310-day Forward exchange rate 310-day USD interest rate 310-day AUD interest rate a. AUD 724,800 O b. AUD 242,000 C. AUD 219,261 d. AUD 292,187 AUD 203,146 6.60% p.a. 8.71% p.a. What will your profit (in AUD) be 310 days from now if you borrow AUD7 million and invest in the United States then convert back to the Australian dollar? O e. Ask AUD1.1789/USD AUD1.2712/USD 6.83% p.a. 9.30% p.a.