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QUESTION 14 The current spot rate of Thai Baht is A$0.20 and the expected spot rate in one year is A$0.199. The current Australian interest
QUESTION 14 The current spot rate of Thai Baht is A$0.20 and the expected spot rate in one year is A$0.199. The current Australian interest rate is 6%. What is the Thai interest rate required for the International Fisher Effect to hold such that the spot rate in one year equals the expected spot rate? A. 6.53% B. 5.47% C. 2.34% D. 1.16% E. Given details are insufficient to calculate the answer. Assume that the following bid and ask rates are given by two Sri Lankan banks for the Australian dollar: Bid Ask Rs. 120.15 Rs. 121.42 People's Bank National Development Bank Rs. 118.50 Rs. 120.25 What is the arbitrage profit per Australian dollar? A. Rs. 0.10. B. Rs. 1.17. C. Rs. 1.65. D. Rs. 2.92. E. There is no arbitrage opportunity. You are an Australian investor. Assume that the Australian one-year interest rate is 4.5% and the one-year interest rate in Canada is 5.5%. The expected annual inflation in Australia is 2%, while the Canadian inflation is expected to be 3%. You have A$100,000 to invest for one year and you believe that PPP holds. The spot exchange rate of a Canadian dollar is A$0.80. What will be the yield on your investment if you invest in the Canadian market? (Don't include any opportunity costs in your calculation) A. 2.5% B. 3.5% C. 4.5% OD.5.5% E. 6.5%
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