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, Plesse rill in the blanks for the FX forward curve below, Spot Exchenge Rate 1.20 USD per EU 3.25% 3.5 US Intorest Rato EUR
, Plesse rill in the blanks for the FX forward curve below, Spot Exchenge Rate 1.20 USD per EU 3.25% 3.5 US Intorest Rato EUR Intarast Rato Farward Exchango Rato 0.30% -0.25% 0.00% 0.50% 1.00% 1.25% lll. TWO LONGER QUESTIONS (Four Points Each) QUES I ION 10. You're the Chief Errvestrnent orricer of d'11"vestment management urnuanyYour teams put together the tabebelow, sing spot and forward exthange rates, expected exhange rates veoost 'sle. 'd expected returnson I cal currency stock tra,kets. For vonvenienxe, they trave converted sll excange tes to direcl uutes (USD per lucal currency. Your USD hure rate fo, mestrwrcourtry's stock market s 6%. Your USD hurdle rste for mvesung ", y courtry's deposits 's 2% The one-year US interest r ate 1%. Spat Forwand ExpectedMarkt Return 1-yoar depasit cate 0.29 0.225 Furozone 1.12 Australla .7 0.73 1.15 5% 1% Notes: .Expected and forward exchange rates are in one year's time -Fxpecred sock market returns are in Incal currency terms PART 1. You're worried that exchange rates could move dramaticalhy,o at first you decide that you want to use forward contracts to remeve exchange rate risk a. Calculate the covered returms for stock markets for the three countries above. Which countries would your firm invest in? which market is the best investment? b. Cakidate the overed returns tor bank deposits tof the three countries above, which countries would your firm invest in? Which country is the best investment
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