Interest rate Parity & Purchasing Power Parity:

1. An investor has a 6 month rate in Switzerland of 4%, spot exchange of $0.9252/SF, forward of $0.9270. What is the 6 month rate in the US?

2.On Aug 8. the 3 month rate in US was 3.75% and in Japan 3%. Spot exchange rate of $0.0090704. What is the forward? How does this estimate compare to the 3 month forward of $0.0108/Yen in table 19.1? What if anything does the difference imply to you about arbitrage opportunities?

3.If a new iMac costs $1400 at a spot rate for euros of 0.76 per $, what is the price in euros for the iMac?

4.If a new Samsung Blue Ray cost Yen 4,000 in Japan and current spot rate is Yen 0.104/$. How much should this machine cost in the US?

5.You have $1,000,000 to invest and you observe the following quotes in the market: 1$ = 106 180-day forward rate = 103.50 U.S. 180-day risk-free interest rate = 4.4%. Japan 180-day risk-free interest rate = 2%. Determine whether interest rate parity holds.