Chapter7: International Arbitrage And Interest Rate Parity
Section: Chapter Questions
Problem 11QA
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A. The value of the US Dollar today is GHS 6.1. Yesterday, the value of the US dollar was GHS 5.91. The Ghana Cedi ____ by ____%.
B. Assuming that existing U.S. one year interest rate is 8% and the Canadian one-year interest rate is 9%. Also assume that interest rate parity exists. Should the forward rate of the Canadian dollar exhibit a discount or a premium? If U.S. investors attempt covered interest arbitrage, what will be their return? If Canadian investors attempt covered interest arbitrage what will be their return?
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