Question
One year interest rate in Singapore is 2% per year and that in China is 3% a year. SGD/CNY is currently 5.0 in the spot
- One year interest rate in Singapore is 2% per year and that in China is 3% a year. SGD/CNY is currently 5.0 in the spot market and 4.9 in the one year forward market. Is there any arbitrage opportunity? If yes, show how it can be done.
- One year interest rate in New Zealand is 1% per year and that in Australia is also 1% a year. AUD/NZD is currently 1.08 in the spot market and 1.1 in the one year forward market. Is there any arbitrage opportunity? If yes, show how it can be done.
- Given the following, compute the bid and ask prices for the GBP/HKD 1 year forward exchange rate. All rates are continuously compounded.
| HKD interest rate (1 year) |
|
| Bid | Ask |
| 1% | 1.25% |
|
|
|
| GBP interest rate (1 year) |
|
| Bid | Ask |
| 2% | 2.25% |
|
|
|
| Spot GBP/HKD |
|
| Bid | Ask |
| 10 | 10.5 |
|
|
|
| Forward GBP/HKD (1 year) |
|
| Bid | Ask |
| ??? | ???? |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Accounting and Auditing Research Tools and Strategies
Authors: Thomas Weirich, Thomas Pearson, Natalie Tatiana
9th edition
1119441915, 1119441919, 978-1-119-3737, 9781119373629 , 978-1119441915
