QUESTION 1B.

The one year interest rate in Singapore is 6 percent. The one year U.S, interest rate is 9 percent. The spot rate of the Singaporean dollar (SS) is \$.50. The forward rate of the Singaporean dollar is $.54. a. According to interest rate parity(IRP), what should be the spot rate of the Singaporean dollar: ( 4 marks) b. According to IRP what should be the forward premium or discount of the Singaporean dollar? ( 4 marks) c. Explain whether or not is covered interest arbitrage feasible for the US investor? You may calculate the yield to the US investor to answer the question. (4 marks) d. By calculating the yield to the investor or otherwise, explain whether covered interest arbitrage is feasible for the Singaporean investor? (4 marks) The one year interest rate in Singapore is 6 percent. The one year U.S, interest rate is 9 percent. The spot rate of the Singaporean dollar (SS) is \$.50. The forward rate of the Singaporean dollar is $.54. a. According to interest rate parity(IRP), what should be the spot rate of the Singaporean dollar: ( 4 marks) b. According to IRP what should be the forward premium or discount of the Singaporean dollar? ( 4 marks) c. Explain whether or not is covered interest arbitrage feasible for the US investor? You may calculate the yield to the US investor to answer the question. (4 marks) d. By calculating the yield to the investor or otherwise, explain whether covered interest arbitrage is feasible for the Singaporean investor? (4 marks)