Home work Problems on FX Rates Show your workings on problems to get full credit 1. The equilibrium exchange rate of pounds is $1.70. At an exchange rate of $1.72 per pound, U.S. demand for pounds would the supply of pounds for sale and there would be a of pounds in the foreign exchange market. 2. The value of the Australian dollar ( A$ ) today is $0.73. Yesterday, the value of the Australian dollar was $0.69. The Australian dollar by percent 3. The annualized forward premium on the euro is 7 percent. What is the 90 -day forward rate on the euro if the spot rate today is $1.25 ? 4. Your company expects to receive 5,000,000 Japanese yen 60 days from now. You decide to hedge your position by selling Japanese yen forward. The current spot rate of the yen is $.0089, while the forward rate is \$[a]. You expect the spot rate in 60 days to be $.0090. How many dollars will you receive for the 5,000,000 yen 60 days from now? 5. Assume the spot rate of a currency is $.37 and the 90 -day forward rate is \$.36. The forward rate of this currency exhibits a of on an annalized basis. 6. According to the IFE, if British interest rates exceed U.S. interest rates: Explain the choithe British pound's value will remain constant. 7. Assume that U.S. and British investors require a real return of 2 percent. If the nominal U.S. interest rate is 15 percent, and the nominal British rate is 13 percent, then according to the IFE, the British inflation rate is expected to be about the U.S. inflation rate, and the British pound is expected 8. If nominal British interest rates are 3 percent and nominal U.S. interest rates are 6 percent, then the British pound (E) is expected to by about percent, according to the international Fisher effect (IFE). 9. US interest rate =5% Canadian interest rate =8% Spot C\$ =$0.6300 Each Canadian $ is 63 cents What would be the 90 Day forward rate for Canadian $ ? Answer should have 4 decimals 10. Find the cross currency rate. SR= Saudi Riyals Euro/$=0.8956,SR/$=3.2645 Find SR/Euro