Question
Use the information below to answer the following questions. Currency per U.S. $ Australia dollar 1.2371 6-months forward 1.2362 Japan yen 100.2700 6-months forward 100.1100
Use the information below to answer the following questions. |
Currency per U.S. $ | |
Australia dollar | 1.2371 |
6-months forward | 1.2362 |
Japan yen | 100.2700 |
6-months forward | 100.1100 |
U.K. pound | .6798 |
6-months forward | .6775 |
Suppose interest rate parity holds, and the current six-month risk-free rate in the United States is 5 percent. 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 | % |
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