Use Figure 18.1 to answer the following questions. Suppose interest rate parity holds, and the current risk-free rate in the United States is 1.2 percent per six months. What must the six-month risk-free rate be in Australia? In Japan? In Great Britain?

Figure 18.1

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Currencies & Commodities wsJ.com/tx ApAI 13, 2012 Currencies U.S-dollar foreign-exchange rates in late New York trading US$ vs, US$vs, în US$ per US$ C) Country/currency Americas in US$ per US$ d%) Country/currency Europe 2276 43946 2.0 Czech Rep.koruna 05318 18.802 4.8 1773 5.6409 1.7 1.3187 7583 -17 004450 224.72 7.6 1734 5.7664 -35 3159 3.1656 -8.2 03399 29.417-8.5 482 6.7465 -1.9 05143 19.4450 -1.9 Switzerland franc 1.0974 9112 -2.8 Venezuela b.fuerte .229885 43500 unch 1-mos forward 1.0978 9109 28 10989 9100 -2.8 1.1009 9083-2.7 5575 1.7936 -6.4 15961 6265 -2.6 1.5958 6267 -2.7 1.5951 .6269 2.7 15941 6273-2.8 Argentina peso* Brazilreal Canadadollar Chile peso 5473 1.8273 2.1 Denmark krone 1.0057 9943 -2.6 Euro areaeuro 002073 482.307.2 Hungary forint Colombia peso 0005593 1788.00 7.9 Norway krone Ecuador US dollar 1 unch Poland zloty Mexico pesco 0768 13.0285 -6.6 Russia ruble 3754 2.664-1.2 Sweden krona Perunew sol Uruguay pesot Asia-Pacific Australiandollar 3-mos forward 5-mos forward r 1.0441 9578 2.2 Turkey lira 1.0406 9610 UK pound 1-mos forward 3-mos forward 6-mos forward 1.0338 9673 23 1-mos forward .0242 9763 -2.2 3-mos forward 1586 6.3058 -0.2 6-mos forward China yuan Hong Kong dollar India rupee 1288 7.7637 Uunch 01951 51.260 -33 Middle East/Africa 2.6527 3770 unch 1654 6.0454-0.1 2675 3.7383 -1.9 1.4115 7085 -0.1 3.5985 2779-0.1 3256 3.0713 33 Lebanonpound 0006649 1503.95 -0.1 2667 3.7502 unch 7.8723 -2.7 2723 36731 unch Indonesia rupiah 0001091 9170 15 Bahraindinar 012362 80.89 5.2 Eqypt pound* 1-mos forward .012366 80.87 49 rael shekel Japan yen 3-mos forw ard 012374 8081 5.0 Jordan dinar 6-mos forward 012392 80.70 51 Kuwait dinar Malaysiaringgit New Zealand dollar 8278 1.2080 -6.1 Saudi Arabiariyal Pakistan rupee Philippines peso Singapore dollar South Koreawon 0008809 1135.15-2.2 oating rate Financial sGovernment rate Taiwan dollar 03394 29.460-27 Russian Central BankrateCommergialrate Thailand baht Vietnam dong 004797 20848-0.9 Source: ICAPplc. 01102 90.745 1.0 South Africa rand 1270 0234 42.645 -2.7 UAE dirham 7974 1.2541 3.3 03245 30.815 2.5