Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Use the information below to answer the following questions. Currency per U.S. $ Australia dollar 1.2383 6-months forward 1.2350 Japan Yen 100.3900 6-months forward 99.9900

Use the information below to answer the following questions.

Currency per U.S. $
Australia dollar 1.2383
6-months forward 1.2350
Japan Yen 100.3900
6-months forward 99.9900
U.K. Pound .6791
6-months forward .6782

Suppose interest rate parity holds, and the current risk-free rate in the United States is 3 percent per six months. Use the approximate interest rate parity equation to answer the following questions.

Requirement 1:

What must the six-month risk-free rate be in Australia? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Risk-free rate %
Requirement 2:

What must the six-month risk-free rate be in Japan? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Risk-free rate %
Requirement 3:

What must the six-month risk-free rate be in Great Britain? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Risk-free rate %

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Ten Commandments To A Financial Healing

Authors: Ms. Kemberley J Washington

1st Edition

1499607261, 978-1499607260

More Books

Students also viewed these Finance questions