URGENT:I need detail solutions for these questions !

STUDENT'S NAME: QUIZ 3 1. Assume the current U.S. dollar-yen spot rate is 90 /$. Further, the current nominal 180-day rate of return in Japan is 1% and 2% in the United States. What is the approximate forward exchange rate for 180 days? Answer: 89.55/$ Solution: 6. A foreign exchange trader faced the following exchange rate and interest rate quotes. Assumptions Value Arbitrage funds available $5,000,000 Spot rate (C$/$) 1.06360 360-day forward rate (C$/$) 1.08 360-day U.S. dollar interest rate 8.450% If there are not any arbitrage opportunities, what 360-day Canadian interest rate should be? Answer: 6.803% Solution: 7. The current U.S. dollar-yen spot rate is 125/$. If the 90-day forward exchange rate is 127 /$ then the yen is selling at a per annum ________ of ________. Answer: discount; 6.30% Solution: 8. Jaguar has full manufacturing costs of their S-type sedan of 22,803. They sell the S-type in the UK with a 20% margin for a price of 27,363. Today these cars are available in the US for $55,000 which is the UK price multiplied by the current exchange rate of $2.01/. Jaguar has committed to keeping the US price at $55,000 for the next six months. If the UK pound appreciates against the USD to an exchange rate of $2.1459/, and Jaguar has not hedged against currency changes, what is the percentage margin the company will realize given the new exchange rate? Answer: 12.4% Solution: 9. Heidi Hi Jensen is now evaluating the arbitrage profit potential in the following market exchange rate and annual interest rate. What will be the potential profit? Assumptions Value kr Equivalent Arbitrage funds available $3,000,000 kr 18,456,000 Spot exchange rate (kr/$) 6.1520 3-month forward rate (kr/$) 6.1880 Expected 3-mouth forward 6.1820 rate (kr/$) US dollar 3-month interest rate 4.000% Danish kroner 3-month interest 5.000% rate Answer: $11,785.54 Solution: 15. Phillips NV produces DVD players and exports them to the United States. Last year the exchange rate was $1.25/euro and Plillips charged 120 euro per player in Euroland and $150 per DVD player in the United States. Currently the spot exchange rate is $1.45/euro and Phillips is charging $160 per DVD player. What is the degree of pass through by Phillips NV on their DVD players? Answer: 41.7% Solution: 16. Assume a nominal interest rate on one-year U.S. Treasury Bills of 3.80% and a real rate of interest of 2.00%. Using the Fisher Effect Equation, what is the exact expected rate of inflation in the U.S. over the next year? Answer: 1.76% Solution: 17. A foreign exchange trader at J.P. Morgan Chase, can invest $10 million, or the foreign currency equivalent of the bank's short term funds, in a covered interest arbitrage with Denmark. Using the following quotes of exchange rate and annual interest rate, can he/she make covered interest arbitrage (CIA) profit? Assumptions Arbitrage funds available Value $10,000,000 Spot exchange rate (kr/$) 3-month forward rate (kr/$) Expected future spot rate (Kr/$) US dollar 3-month interest rate Danish kroner 3-month interest rate Answer: $5,000.00 Solution: 6.1920 6.2350 6.2400 3.000% 6.000% 18. A foreign exchange trader is exploring covered interest arbitrage possibilities. He wants to invest $5,000,000 or its CAD equivalent, in a covered interest arbitrage between U.S. dollars and CAD. He faced the following exchange rate and interest rate quotes. Assumptions Value Arbitrage funds available CAD Equivalent $5,000,000 Spot rate (C$/$) 5,300,000 1.060 180-day forward rate (C$/$) 1.080 180-day U.S. dollar interest rate 4.800% 180-day Canadian interest rate 3.500% What is the arbitrage profit? Answer: C$136,850 Solution: 20. The Economist publishes annually the "Big Mac Index" by which they compare the prices of the McDonald's Corporation's Big Mac hamburger around the world. The index estimates the exchange rates for currencies based on the assumption that the burgers in question are the same across the world and therefore, the price should be the same. If a Big Mac costs $2.54 in the United States and 294 yen in Japan, what is the estimated exchange rate of yen per dollar as hypothesized by the Hamburger index? Answer: 115.75/$ Solution: 21. Assume a nominal interest rate on one-year U.S. Treasury Bills of 2.60% and a real rate of interest of 1.00%. Using the Fisher Effect Equation, what is the approximate expected rate of inflation in the U.S. over the next year? Answer: 1.60% Solution: 22. Other things equal, and assuming efficient markets, if a Honda Accord costs $24,682 in the U.S., then at an exchange rate of $1.57/, the Honda Accord should cost ________ in Great Britain. Answer: 15,721 Solution: 23. According to the Big Mac Index, the implied PPP exchange rate is Mexican peso 8.50/$1 but the actual exchange rate is peso10.80/$1. Thus, at current exchange rates the peso appears to be ________ by ________. Answer: undervalued; approximately 21% Solution: 25. One year ago the spot rate of U.S. dollars for Canadian dollars was $1/C$1. Since that time the rate of inflation in the U.S. has been 4% greater than that in Canada. Based on the theory of Relative PPP, the current spot exchange rate of U.S. dollars for Canadian dollars should be approximately: Answer: $1.04/C$ Solution: 29. Takeshi Kamada, Credit Suisse (Tokyo), observes that the /$ spot rate has been holding steady, and both dollar and yen annual interest rates have remained relatively fixed over the past week. Takeshi wonders if he should try an uncovered interest arbitrage (UIA) and thereby save the cost of forward cover. Many of Takeshi's research associates -- and their computer models -- are predicting the spot rate to remain close to 117.00/$ for the coming 180 days. Using the following data to analyze the UIA potential. Assumptions Value Arbitrage funds available Yen Equivalent $5,000,000 Spot rate (/$) 115.00 180-day forward rate (/$) 117.80 575,000,000 Expected spot rate in 180 days (/$) 117.00 180-day U.S. dollar interest rate 4.800% 180-day Japanese yen interest rate 3.400% Answer: 14,265,000 Solution: 30. Assume the current U.S. dollar-British spot rate is 0.6993/$. If the current nominal one-year interest rate in the U.S. is 5% and the comparable rate in Britain is 6%, what is the approximate forward exchange rate for 360 days? Answer: 0.7060/$ Solution: Question 1 Spot rate (/$) 90.00 180 days rate 1% Hello,student, you see i have competed few 180 days $ rate 2% questions. However, in order complete all, rate* i will interest need rate more time. Therefore, forward exchangeto rate = (Spot factor/$ interest rate factor) Can you please extend the time(90*1.005/1.01) for 12 more hours. 89.55 If you agree, then please extend the deadline. Question 6 If you don't then kindly post " i Don't understand", so that i can opt out and others may help you. Spot rate (C$/$) 360 day forward rate 360 day U.S. dollars interest rate 1.0636 1.08 8.45% We know as per interest rate partity, Spot rate/Forward rate = C$ interest rate factor/US $ interest rate factor So, C$ interest rate factor = (Spot rate/Forward rate)* US $ interest rate factor So, C$ interest rate factor = (1.0636/1.08*1.0845) = 1.068032 So, 360 day C$ interest rate = 6.803% Question 7 Spot rate (/$) 90 day Forward rate (/$) Annualised forward premium on = Annualised forward discount on = 125 127 (Spot rate-Forward rate)/Forward rate*360 (125-127)/127*360/90 -6.30% 6.30% Question 8 Price committed New Exchange rate ($/) Price equivalent in pound Manufacturing cost Margin Margin Percentage $ $ Arbitrge funds Spot rate (KR/$) 3 month forward rate $ interest rate KR interest rate $ 55,000.00 2.1459 25,630.27 (55000/2.159) 22,803.00 2,827.27 (25630.27-22803) 12.4% (2827.27/22803) Question 9 3,000,000.00 6.152 6.188 4% 5% As per, Arbitrage Rule of Thumb: If the difference in interest rates is greater than the forward premium/discount, or expected change in the spot rate for UIA, invest in the higher interest yielding currency. If the difference in interest rates is less than the forward premium (or expected change in the spot rate), invest in the lower yielding currency. Difference in interest rates (ikr - i$) Forward discount on the krone CIA profit potential 1.000% -2.327% -1.327% This tells Heidi that she should borrow Danish kroner and invest in the LOWER interest rate currency, the dollar, gaining on the re-exchange of dollars for kroner at the end of the period Amount borrowed in KR Total outflow at the end of month 3 in KR Equivalent cash outflow in month 3 in $ 18,456,000.00 18,686,700.00 $ 3,019,828.70 Amount invested in US $ Cash inflow at the end of month 3 $ $ 3,000,000.00 3,030,000.00 Net Cashinflow at the end of month 3 $ 10,171.30 Last year exchange rate ($/) Spot rate ($/) $ $ 1.25 1.45 Question 15 tions. etor/$ time. interest rate factor) . , ward rate*360 r than the forward e higher interest premium (or expected WER interest rate e end of the period