"The US risk-free rate is 11% and the Mexico rate is 6%. The spot and 11-month forward exchange rates are 19.4 and 20.7 peso/$, respectively. Find the covered interest arbitrage profit (expressed in $) you'll make in11 months if you can borrow either $1M or its equivalent in pesos?" "111,771" "93,143" "98,309" "99,009" "96,477"
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- The US risk-free rate is 8% and the Mexico rate is 7%. The spot and 10-month forward exchange rates are 20.9 and 19.9 peso/$, respectively. Find the covered interest arbitrage profit (expressed in $) you'll make in10 months if you can borrow either $1M or its equivalent in pesos?Assume the spot rate between the uk and the US is .€ .6789= $1 while the one year Foward rate is €.6782=$1. The risk free rate in the UK is 3.1 percent. The risk free rate in the U.S is 2.9 percent. How much profit can you earn for the year on a loan of $1,500 by utilizing covered interest abitrage?The spot rate between the U.K. and the U.S. is £.7534/$, while the one-year forward rate is £.7524/$. The risk-free rate in the U.K. is 4.27 percent and in the United States is 2.58 percent. How much in profit can you earn on $9,000 utilizing covered interest arbitrage?
- Suppose that the U.S. interest rate on one year Treasury notes was 4.5%. 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 4.1%. 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 $20 million for 3 months? A. YES- $27,395.21 would be the profit B. YES- $29,385.41 would be the profit C. YES- $31,695.53 would be the profit D. YES- $33,875.42 would be the profit E. NO- there is no opportunity for a profitSuppose 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-$37,342.89 would be the profit OD. NO- there is no opportunity for a profitIf the foreign interest rate is 4%, the risk premium on domestic assets, ρ, is 18%, and the expected rate of depreciation of the domestic currency against the foreign currency is 3%, what is the domestic interest rate in percentage terms, given covered interest parity holds? [All variables have a 1-year time frame.]
- Suppose that the annual interest rates on 6-months borrowing in Romania and the United States are 12.7 % and 0.8 %, respectively. The current spot rate RON/US$ is 4.00 and 6-months forward rate RON/US$ is 4.21. Does interest rate parity hold? Would it be as a result of covered or uncovered interest arbitrage, why? Determine arbitrage potential in b) using spot rate after six months of RON/US $= 4.25 rather than 6-months forward rate.Suppose the interest rate on investments in GBP is 12% in London and the interest rate for comparable investments in USD in New York is 7%. Suppose further, that the spot rate is USD 1.95 /GBP and that the one-year forward rate is USD 1.87 /GBP a) Is the covered interest parity violated? Is there an arbitrage opportunity? b) If yes, how high is it if you were able to borrow USD 1 million from a US-based bank?If the interest rate in Oman is 10% and in China is 15%. Current spot exchange rate is CNY16.59/0MR and one-year forward rate is CNY16.57/OMR. If you have the option to borrow OMR 1,000 from bank Muscat for one year then, on the basis of covered interest arbitrage how much arbitrage profit you can make? OMR 51.3880 None of these OMR 1,051.3880 OMR 1,000
- BIDV can borrow either AUD10 million or $5 million. The current spot rate of the AUD is $0.48 and AUD will increase to $0.5 in the next 5 days. Furthermore, BIDV expects the spot rate of the euro to be $1.10 in 90 days. Today, U.S. Dollar ($) lending rate is 7.10% and borrowing rate is 7.50%. On the other hand, AUD lending rate is 6.80% and borrowing rate is 7.25%. If BIDV's forecast is correct, what will its dollar profit be from speculation over the five-day period? (assuming it does not use any of its existing consumer deposits to capitalize on its expectations) (Write down the number only, no currency symbol, round up to 0 decimal number, assume that 1 year has 360 days)You can buy or sell the £ spot at $1.98 to the pound. You can buy or sell the pound one-year forward at $2.01 to the pound. If U.S. annual interest rates are 5%, what must be the approximate one-year British interest rate if interest rate parity holds? A. 4.00% B. 2.75% C. 5.25% D. 3.48%Suppose the nominal interest rate in the U.S. is 8% per year, the nominal interest rate in Brazil is 15% per year, and today’s spot rate is S ($/BRL) =0.49. Assuming that the International Fisher Effect holds, what is the expected spot rate S90 ($/BRL) in three months?