Question
iAUD(%) iUSD(%) S(AUD/USD) One-Year Forward Rate 2017 6.53 6.50 2.2599 2.3443 2018 6.70 6.00 2.2015 2.2748 2019 4.91 2.44 2.1117 2.2546 2020 5.94 1.45 2.1231
| iAUD(%) | iUSD(%) | S(AUD/USD) | One-Year Forward Rate | |
| 2017 | 6.53 | 6.50 | 2.2599 | 2.3443 |
| 2018 | 6.70 | 6.00 | 2.2015 | 2.2748 |
| 2019 | 4.91 | 2.44 | 2.1117 | 2.2546 |
| 2020 | 5.94 | 1.45 | 2.1231 | 2.2052 |
Suppose you are a US investor and you conduct the following transactions. You borrow $1,000,000 at the start of each year and invest in AUD for one year, then you convert back to USD at the end of that year. One-year interest rates, the exchange rate between AUD and USD, and one-year forward rates are provided above for the years 2017 to 2020. One-year interest rates in Australia and the US are on January 1 each year, and the exchange rate and forward rate are the amounts of AUD per USD on December 31 each year. What is your maximum transaction USD profit in 2019?
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Intermediate Accounting
Authors: Loren A. Nikolai, John D. Bazley, Jefferson P. Jones
11th edition
978-0538467087, 9781111781262, 538467088, 1111781265, 978-0324659139
