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can you please help out with part a - f thank you what additional info do you need? Exercise 6: The current exchange rate is
can you please help out with part a - f thank you
what additional info do you need?
Exercise 6: The current exchange rate is 0.9 USD for 1 AUD. Each year the value of the USD relative to the AUD can either go up by 25% with probability 25% stay constant with probability 50% go down by 20% with probability 25% a) Fill out the following table for the exchange rates and the corresponding probabilities. Year Exchange rate Probability t= 1 t= 2 t= 3 b) We obtain 100 USD in one year from now. Calculate the AUD value in one year from now of the 100 USD payment (without discounting). Year Exchange rate Value of 100 USD in AUD t= 1 c) Calculate the variance of the AUD value in one year from now of the 100 USD payment (without discounting). d) We obtain 100 USD in three years from now. Calculate the AUD value in three years from now of the 100 USD payment (without discounting). Year Exchange rate Value of 100 USD in AUD t=3 e) Calculate the variance of the AUD value in three years from now of the 100 USD payment (without discounting). f) What can we conclude for the relationship between maturity and exchange rate riskStep by Step Solution
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