Last week, the spot rate for Australian Dollars was 0.7306 USD/ 1 AUD. The 180-day (6 month) forward rate quoted in the market was for 0.7340 USD/1 AUD and the risk-free rate on 180-day securities was 2.90 percent APR for United States LIBOR and 1.96 percent APR for Australian LIBOR. (LIBOR rates are widely used as a reference rate for financial instruments.) Assume that the US is the home country.

Are the quotes for AUD above relative to the USD direct or indirect quotations?

Choose one: direct or indirect

Is the USD expected to appreciate or depreciate relative to the AUD given the forward rate quoted above?

Choose one: appreciate or depreciate

What is the implied forward rate if interest rate parity holds in this case? Does interest rate parity hold here? Use 4 decimal places for accuracy.

What is the Implied forward rate?

Which countrys risk free security offers the highest expected $ profit for a US investor, or are the $ profits the same?

Determine the $ profit for both investments using a beginning amount of 1,000 USD. What is the $ profit of US LIBOR and what is the $ profit for Australian LIBOR