The three-month interest rate on yen is i=1% per annum; the three-month interest rate on euros is i=5.5% per annum. Which one of the following statements is correct?

Select one:

a. Based on the Uncovered Interest Rate Parity, the euro is expected to appreciate by 4.5% against yen next three months.

b. According to the asset market approach, the current spot rate should be 1.293/ if the expected three-month spot rate S₃(/)=1.250.

c. In a carry trade between euro and yen for three months, the profit will be 0.0315(for each yen borrowed) if the euro has appreciated 2% against yen in the three months.

d. The euro is going to appreciate in the next year.

e. To start a carry trade, a trader can short the euro against yen in three-month forward contracts.

Which one of the following statements is correct about the exchange rates?

Select one:

a. The European Central Bank announces to increase interest rate by 0.1%. The market consensus was 0.2% increase before the announcement. Upon the news, we would see euro to appreciate.

b. When the central bank of Australia raises interest rate to a level that is more than all traders expected, i.e. an unexpected rise in interest rate, the Australian dollar will depreciate.

c. Price of currency futures(or forwards) will be slightly lower than the spot exchange rate at maturity.

d. A country with high inflation may see its currency to appreciate according to the asset market approach.

e. Current interest rates are i_$=1% and i=3.5% and they will stay constant for many years. We would expect the Euro to appreciate against dollar according to the uncovered interest rate parity.

You enter a long position in a future contract with the size of 125,000 today. The futures expire in 90 days. The interest rates are i_$=2% and i=4%. The current spot rate is $1.38/. Assume 360 days a year. If the spot rate is $1.43/ the next day and interest rates remain the same, How much is your profit or loss for this day?

Select one:

a. $6250

b. $6228.80

c. -$3974.78

d. $3974.78

e. -$6228.80