Question 20 (4 points) Question 20 Unsaved Suppose that the one-year interest rate is 7.51% in Italy, the spot exchange rate is $1.5507/1.00, and the one-year forward exchange rate is $1.5822/1.00. Based on interest rate parity, what must the one-year interest rate be in the United States? Question 20 options:

7.464%

5.370%

9.694%

5.096%

1.991%

9.666%

Question 21 (4 points) Question 21 Unsaved Suppose that the one-year interest rate is 5.52% in Italy, the spot exchange rate is $1.5726/1.00, and the one-year forward exchange rate is $1.5254/1.00. Based on interest rate parity, what must the one-year interest rate be in the United States? Question 21 options:

8.076%

3.094%

14.935%

12.299%

8.785%

2.353%

Question 22 (4 points) Question 22 Unsaved A currency dealer can borrow $1,450,000 (or the equivalent in euros) for one year. The one-year interest rate is 4.30% in the U.S. and 8.40% in the euro zone. The spot exchange rate is $1.2936/1.00 and the one-year forward exchange rate is $1.2577/1.00. What arbitrage profit results if the trader borrows the maximum available funds? Question 22 options:

$15,829.39 OR 12,585.98

$78,401.94 OR 62,337.55

$59,450.00 OR 47,268.82

$20,261.62 OR 16,110.06

$107,410.66 OR 85,402.45

$12,585.98 OR 10,007.14

Question 23 (4 points) Question 23 Unsaved A currency dealer can borrow $1,400,000 (or the equivalent in euros) for one year. The one-year interest rate is 6.80% in the U.S. and 4.20% in the euro zone. The spot exchange rate is $1.2128/1.00 and the one-year forward exchange rate is $1.2597/1.00. What arbitrage profit results if the trader borrows the maximum available funds? Question 23 options:

$77,688.53 OR 61,672.25

$36,400.00 OR 28,895.77

$9,850.03 OR 7,819.35

$100,995.09 OR 80,173.92

$15,887.14 OR 15,887.14

$20,013.03 OR 15,887.14

Question 24 (4 points) Question 24 Unsaved Suppose that the one-year interest rate is 4.71% in the United States and 4.17% in Germany. The spot exchange rate is $1.3954/1.00. What should the one-year forward rate be to preclude arbitrage profits? Question 24 options:

$1.4026/1.00

$1.3882/1.00

$1.4611/1.00

$1.4536/1.00

$1.6014/1.00

$1.2341/1.00

Question 25 (4 points) Question 25 Unsaved Suppose that the one-year inflation rate is 2.64% in the United States and 3.20% in Germany. The spot exchange rate is $1.2811/1.00. What should the one-year forward rate be according to relative purchasing power parity? Question 25 options:

$1.2742/1.00

$1.2881/1.00

$1.3149/1.00

$1.3221/1.00

$1.2041/1.00

$1.4278/1.00