1.You observed the bid rate of a New Zealand dollar is $.3324 while the ask rate is $.3342 at Bank X. The bid rate of the New Zealand dollar is $.3232 while the ask rate is $.3249 at Bank Y. What would be your dollar amount profit if you use $1,000,000 to execute locational arbitrage?4.The inflation rate in the U.S. is 2%, while the inflation rate in Japan is 1.5%. The current exchange rate is $1 equal to 109 Japanese yen. If purchasing power parity condition is existed, what is the new exchange rate for the yen?

5. The interest rate in the U.K. is 3%, while the interest rate in the U.S. is 2%. The spot rate for the British pound is $1.29. According to the international Fisher effect (IFE), what is new level of the British pound?

6. Bronco Co. is a U.S.-based MNC that has subsidiaries in Spain and Germany. Both subsidiaries frequently remit their earnings back to the parent company. The Spain subsidiary generated a net outflow of 4,000,000 this year, while the German subsidiary generated a net inflow of 4,500,000. What is the net inflow or outflow as measured in U.S. dollars this year? The exchange rate for the euro is $1.1356.

7. If one-year nominalinterest rate in the U.S. is 3%, while the one-year nominal interest rate in Australia is 5%. The spot rate of the Australian dollar is $.73. Interest Rate Parity is held. You will receive 5 million Australian dollars in one year. Today, you sell a one-year forward contract in Australian dollars. How many U.S. dollars will you have in one year from your forward contract?

8. Today, the one-year U.S. interest rate is 2%, while the one-year interest rate in Mexico is 6%. The spot rate of the Mexico peso (MXP) is $.046 The one-year forward rate of the MXP exhibits a 10% discount. Determine the yield (percentage return on investment) to an investor from Mexico who engages in covered interest arbitrage.

9.Current one-year interest rates in Europe is 4 percent, while one-year interest rates in the U.S. is 2 percent. You convert $200,000 to euros and invests them in France. One year later, you convert the euros back to dollars. The current spot rate of the euro is $1.20.

a.According to the IFE, what should the spot rate of the euro in one year be?

b.If the spot rate of the euro in one year is $1.12, what is your percentage return from your investment?

c.If the spot rate of the euro in one year is $1.31, what is your percentage return from your investment?

d.What must the spot rate of the euro be in one year for your strategy to be successful?