Suppose today you see the following spot and forward quotes for Japanese yen (JPY), Australian dollars (AUD), and US dollars:

	Spot	1 month	1 year
JPYUSD	118.45	117.65	116.25
USDAUD	0.8505	0.8401	0.8309

Answer Q4-Q6 with this information.

a) According to the unbiased hypothesis (UH), what should be your expected spot rate for JPYUSD in one year? What should be your expected spot rate for USDAUD in one year?

Group of answer choices

a. JPY116.25/USD; USD0.8309/AUD

b. JPY114.05/USD; USD0.8113/AUD

c. JPY118.45/USD; USD0.8505/AUD

d. JPY120.65/USD; USD0.8701/AUD

b) Suppose you obtain the historical spot and one-year forward rates for USDAUD from 1976 to 2013. The average forward discount of AUD relative to USD is 2.95%, and the average depreciation of the AUD against USD is 1.03% over the sample period. This finding somewhat provides evidence for ______.

Group of answer choices

a. capital account deficit

b. forward rate bias

c. uncovered interest rate parity (UIRP)

d. arbitrage opportunity

c) Suppose you revise your expectations for the future spot rates based on the finding in Question 5. Suppose you now expect the spot rate in one year to be USDAUD 0.8417. What contract would you make to speculate in the forward market by either buying or selling a AUD 1,000,000 forward? What is your expected dollar profit?

Group of answer choices

a. buy; $10,800

b. buy; $8,800

c. sell; $8,800

d. sell; $10,800