According to the Interest Rate Parity condition, what is the 1 year forward exchange rate?

a.$1.269/

b.$1.281/

c.$1.318/

d.$1.306/

Question 2:

Assuming that Jennifer Hart can work with 1,000,000 Pound or 1,312,000 Dollar; compute the arbitrage profit?

a.57,317.65

b.59,180.47

c.24,817.65

d.$31,642.5

Use the following information to answer question 3 and 4

Suppose that the current spot exchange rate is 0.80/$ and the bank quoted forward exchange rate is 0.7813/$. The one-year interest rate is 1.4% in the United States and 1.35% in France.

Question 3:

According to the Interest Rate Parity condition, what is the 1 year forward exchange rate?

a.0.7817/$

b.0.7809/$

c.0.8004/$

d.0.7996/$

Question 4:

What is your arbitrage strategy if you have $1,000,000 or 800,000?

a.$38,286.19

b.$23,757.6

c.7,866.58

d.18,561.8

Use the following information to answer question 5 and 6

Suppose that the current spot exchange rate between Japanese Yen and Euro is 130/ and the one-year forward exchange rate is 138.25/. The one-year interest rate is 2.0 % in yens and 1.25% in euro.

Question 5:

According to the Interest Rate Parity condition, what is the 1 year forward exchange rate?

a.139.27/

b.130.96/

c.129.04/

d.137.23/

Question 6:

What is your arbitrage strategyifyou can borrow 10 million Yen or 76,923.08 euro amount, at the current spot exchange rate?

a.4,107.17

b.73,779.39

c.767,548.72

d.567,548.72