| Question 1 of 11 | 9.0 Points | Accepted characters: numbers, decimal point markers (period or comma), sign indicators (-), spaces (e.g., as thousands separator, 5 000), "E" or "e" (used in scientific notation). NOTE:For scientific notation, a period MUST be used as the decimal point marker. Complex numbers should be in the form (a + bi) where "a" and "b" need to have explicitly stated values. For example: {1+1i} is valid whereas {1+i} is not. {0+9i} is valid whereas {9i} is not. Question1. Suppose that the treasurer of IBM has an extra cash reserve of $100,000,000 to invest for six months. The six-month interest rate is 8 percent per annum in the United States and 7 percent per annum in Germany. Currently, the spot exchange rate is 1.01 per dollar and the six-month forward exchange rate is 0.99 per dollar. The treasurer of IBM does not wish to bear any exchange risk. If he chooses to invest in German, what will be the value of the investment after 6 months in USD? (principal and interest) Note that: no FX risk implies that IBM will use forward contract to lock the future rate of USD/EUR. 6-month interest rate = 1/2 * 12-month rate Dont put dollar sign ($) in your answer, 4 numbers after decimal place. |
| Question 2 of 11 | 9.0 Points | Accepted characters: numbers, decimal point markers (period or comma), sign indicators (-), spaces (e.g., as thousands separator, 5 000), "E" or "e" (used in scientific notation). NOTE:For scientific notation, a period MUST be used as the decimal point marker. Complex numbers should be in the form (a + bi) where "a" and "b" need to have explicitly stated values. For example: {1+1i} is valid whereas {1+i} is not. {0+9i} is valid whereas {9i} is not. Quesiton 3 in textbook. Currently, the spot exchange rate is $1.50/ and the three-month forward exchange rate is $1.52/. The three-month interest rate is 8.0% per annum in the U.S. and 5.8% per annum in the U.K. Assume that you can borrow as much as $1,500,000 or 1,000,000. What is the actual annualized percentage forward premium/discount. 3-month interest rate = 1/4 * 12-month rate (if it is 1.6789%, put only 1.6789. 4 numbers after decimal place) |
| Question 3 of 11 | 9.0 Points | Accepted characters: numbers, decimal point markers (period or comma), sign indicators (-), spaces (e.g., as thousands separator, 5 000), "E" or "e" (used in scientific notation). NOTE:For scientific notation, a period MUST be used as the decimal point marker. Complex numbers should be in the form (a + bi) where "a" and "b" need to have explicitly stated values. For example: {1+1i} is valid whereas {1+i} is not. {0+9i} is valid whereas {9i} is not. Quesiton 3 in textbook. Currently, the spot exchange rate is $1.50/ and the three-month forward exchange rate is $1.52/. The three-month interest rate is 8.0% per annum in the U.S. and 5.8% per annum in the U.K. Assume that you can borrow as much as $1,500,000 or 1,000,000. According to the IRP, what is the Expected 3-month percentage forward premium/discount. (if it is 1.6789%, put only 1.6789. 4 numbers after decimal place) |
| Question 4 of 11 | 8.0 Points | Currently, Interest rate in the US is 3% and interest rate in Japan is 5%. According to the IRP, which of the following is correct | A. in forward market, the value USD should be higher than the value of USD in spot market by about 2%. In other words, USD should exhibit a forward premium of about 2% over JPY | | | B. in forward market, the value JPY should be higher than the value of JPY in spot market by about 2%. In other words, JPY should exhibit a forward premium of about 2% over JPY | | | C. the value of USD in spot market will rise by about 2% against JPY in the future. | | | D. the value of JPY in spot market will rise by about 2% against USD in the future. | | Reset Selection |
| Question 5 of 11 | 8.0 Points | Currently, Interest rate in the Mexico is 8% and interest rate in Japan is 5%. According to the IRP, which of the following is correct | A. JPY should have a forward discount of about 3% | | | B. JPY should have a forward premium of about 3% | | | C. MXN should have a forward discount of about 8% | | | D. MXN should have a forward premium of about 8% | | Reset Selection |
| Question 6 of 11 | 8.0 Points | Accepted characters: numbers, decimal point markers (period or comma), sign indicators (-), spaces (e.g., as thousands separator, 5 000), "E" or "e" (used in scientific notation). NOTE:For scientific notation, a period MUST be used as the decimal point marker. Complex numbers should be in the form (a + bi) where "a" and "b" need to have explicitly stated values. For example: {1+1i} is valid whereas {1+i} is not. {0+9i} is valid whereas {9i} is not. If interest rate in UK is 7% and interest rate in US is 4%, please calculate the percentage premium or discount of GBP on forward market if IRP holds. Note: if you answer is a positive number (say 1.56%) means premium, don't include %, just fill in your answer 1.56. if you answer is a negative number (say -1.56%) means premium, don't include %, just fill in your answer -1.56. % |
| Question 7 of 11 | 8.0 Points | Accepted characters: numbers, decimal point markers (period or comma), sign indicators (-), spaces (e.g., as thousands separator, 5 000), "E" or "e" (used in scientific notation). NOTE:For scientific notation, a period MUST be used as the decimal point marker. Complex numbers should be in the form (a + bi) where "a" and "b" need to have explicitly stated values. For example: {1+1i} is valid whereas {1+i} is not. {0+9i} is valid whereas {9i} is not. If interest rate in UK is 2% and interest rate in US is 8%, please calculate the percentage premium or discount of GBP on forward market if IRP holds Note: if you answer is a positive number (say 1.56%) means premium, don't include %, just fill in your answer 1.56. if you answer is a negative number (say -1.56%) means premium, don't include %, just fill in your answer -1.56. % |
| Question 8 of 11 | 8.0 Points | Accepted characters: numbers, decimal point markers (period or comma), sign indicators (-), spaces (e.g., as thousands separator, 5 000), "E" or "e" (used in scientific notation). NOTE:For scientific notation, a period MUST be used as the decimal point marker. Complex numbers should be in the form (a + bi) where "a" and "b" need to have explicitly stated values. For example: {1+1i} is valid whereas {1+i} is not. {0+9i} is valid whereas {9i} is not. Quesiton 3 in textbook. Currently, the spot exchange rate is $1.50/ and the three-month forward exchange rate is $1.52/. The three-month interest rate is 8.0% per annum in the U.S. and 5.8% per annum in the U.K. Assume that you can borrow as much as $1,500,000 or 1,000,000. According to the IRP, what is the Expected 3-month USD/GBP forward rate. (4 numbers after decimal place) |
| Question 9 of 11 | 8.0 Points | Currently, the spot exchange rate is $1.50/ and the three-month forward exchange rate is $1.52/. The three-month interest rate is 8.0% per annum in the U.S. and 5.8% per annum in the U.K. Assume that you can borrow as much as $1,500,000 or 1,000,000. What is the correct Covered Interest Abitrage? | A. Borrow USD, convert to GBP, invest in GBP. At the end of the 3 month, get GBP and convert to USD and pay the loan. | | | B. Borrow USD, convert to GBP, invest in GBP, sell GBP forward. At the end of the 3 month, get GBP and convert to USD and pay the loan. | | | C. Borrow GBP, convert to USD, invest in USD, sell USD forward. At the end of the 3 month, get USD and convert to GBP and pay the loan. | | | D. Borrow GBP, convert to USD, invest in USD. At the end of the 3 month, get USD and convert to GBP and pay the loan. | | Reset Selection |
| Question 10 of 11 | 8.0 Points | Accepted characters: numbers, decimal point markers (period or comma), sign indicators (-), spaces (e.g., as thousands separator, 5 000), "E" or "e" (used in scientific notation). NOTE:For scientific notation, a period MUST be used as the decimal point marker. Complex numbers should be in the form (a + bi) where "a" and "b" need to have explicitly stated values. For example: {1+1i} is valid whereas {1+i} is not. {0+9i} is valid whereas {9i} is not. Quesiton 3 in textbook. Currently, the spot exchange rate is $1.50/ and the three-month forward exchange rate is $1.52/. The three-month interest rate is 8.0% per annum in the U.S. and 5.8% per annum in the U.K. Assume that you can borrow as much as $1,500,000 or 1,000,000. What is the Covered Interest Abitrage profit in USD? (no USD or $ sign. 2 numbers after decimal place) |
| Question 11 of 11 | 8.0 Points | Currently, the spot exchange rate is $1.50/ and the three-month forward exchange rate is $1.52/. The three-month interest rate is 8.0% per annum in the U.S. and 5.8% per annum in the U.K. Assume that you can borrow as much as $1,500,000 or 1,000,000. How does market react to your Covered Interest Abitrage? | A. USD/GBP spot rate will increase and interest rate in USD will increase | | | B. USD/GBP spot rate will increase and interest rate in GBP will increase | | | C. USD/GBP forward rate will increase and interest rate in GBP will increase | | | D. USD/GBP forward rate will increase and interest rate in GBP will drop | | Reset Selection |
