Question
Hi, there are 3 questions below, thanks! You observe the following information spot rate = $1.65; 1-year forward rate = $1.75; U.S. 1-year interest rate
Hi, there are 3 questions below, thanks!
You observe the following information spot rate = $1.65; 1-year forward rate = $1.75; U.S. 1-year interest rate =1.8%; U.K. 1-year interest rate = 3.2%
The arbitrage trading will make:
A. USD interest rate drops | ||||||||||
B. GBP appreciate in spot market | ||||||||||
C. USD depreciate in forward market | ||||||||||
D. GBP interest rate increases Assume that today, the spot exchange rate is CAD1.00 = USD0.90 and the rates of inflation expected to prevail for the next year in the U.S. is 4% and 3% in Canada. What is the one-year forward rate that should prevail? You observe the following information spot rate = $1.65; 1-year forward rate = $1.75; U.S. 1-year interest rate =1.8%; U.K. 1-year interest rate = 3.2% The appropriate covered interest arbitrage strategy is:
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