02:27 . 46 INF 401 - International Finance Class 2 Question 1 A currency dealer has good credit and can borrow either $1,000,000 or 800,000 for one year. The one-year interest rate in the U.S. is is = 2% and in the euro zone the one-year interest rate is i = 6%. The spot exchange rate is $1.25 = 1.00 and the one-year forward exchange rate is $1.20 = 1.00. Show how to realize a certain profit via covered interest arbitrage. Question 2 The spot exchange rate between the Swiss Franc and US dollar was 1.0404 ($ per franc). Interest rates in the United States and Switzerland were 1% and 0.4% per annum, respectively, with quarterly compounding. The 3-month forward exchange rate was 1.0300 ($ per franc). What arbitrage strategy was possible? How does your answer change if the exchange rate is 1.0500 ($ per franc). Question 3 Will an arbitrageur facing the following prices be able to make money? borrowing lending Bid Ask ISI 5% 4.7% 6% Spot $1.00 1.00 $1.02= 1.00 5.5% Forward $0.95 = 1.00 $0.97= 1.00| Question 4 Suppose that you are the treasurer of IBM with an extra US$1,000,000 to invest for six months. You are considering the purchase of U.S. T-bills that yield 1.810% (that's a six month rate, not an annual rate by the way) and have a maturity of 26 weeks. The spot exchange rate is $1.00 = 100, and the six month forward rate is $1.00 110. The interest rate in Japan (on an investment of comparable risk) is 13 % for six months. What is your strategy? = eviri Kullanlabiliyor 1