90 day risk free securities in the united states

Reference no: EM13835440

Question 1 Assume that interest rate parity holds, in both the spot market and the 90 day forward market, 1 japanese yen equals 0.0086 dollar. In japan, 90 day risk free securities yield 4.6%. what is the yield on 90 day risk free securities in the united states?

Question 2 Assume that interest rate parity holds and that 90 day risk free securities yield 5% in the US and 5.3% in Germany. In the spot market, 1 euro equals $0.80 dollar.

A) is the 90 day forward rate trading at a premium or a discount relative to the spot rate?

B) what is the 90 day forward rate ?

C) Now assume that the 90-day forward rate is $0.79 per Euro. Does the Interest Rate Parity (IRP) hold now? Are there arbitrage opportunities and why? If yes, where would you borrow and where would you invest and why? Arrange arbitrage transactions. Assuming no transaction costs, what would be your arbitrage profit in % on an annual basis per 1,000 $s or Euros borrowed?

Reference no: EM13835440

Questions Cloud

Calculate yield to maturity for each bond : Assume you manage a bond portfolio with a yield to maturity of 1.8% and duration of 5.1. Perform the below in the “Bond” tab provided in the attached excel file. a. Calculate yield to maturity for each bond. b. Calculate duration for each bond.

Explain the contribution of strategic hrm : Explain the contribution of strategic HRM to contemporary people management and organisational success. Analyse why effective people management HRM remains a challenging task for managers.

The path for jews in the process of assimilation : What has been the path for Italians in the process of assimilation and prejudice in the United States? What has been the path for Jews in the process of assimilation and prejudice in the United States? Based on your assessment of these two questions,..

Major factors supporting that decision-making method? : major factors supporting that decision-making method?

90 day risk free securities in the united states : Question 1 Assume that interest rate parity holds, in both the spot market and the 90 day forward market, 1 japanese yen equals 0.0086 dollar. In japan, 90 day risk free securities yield 4.6%. what is the yield on 90 day risk free securities in the ..

How selection of poem by owen contend with the piity of war : In "Strange Meeting" Owen writes about "the pity of war, the pity war distilled". How do the selections of poems by Sassoon and Owen contend with "the pity of war?

How american culture have integrated other traditions : For this assignment consider how American culture and communities have integrated other traditions and cultural influences through the food that we eat. You can approach this by researching the top foods consumed by Americans, the top recipes used, o..

Calculate the daily difference in value of the portfolio : Calculate the daily difference in value of the portfolio and the S&P 500 futures prices i.e. ΔP and ΔF. Using these two difference series calculate the correlation between them and their standard deviations. Use the correlation coefficient and the tw..

Examples of burial art to that of the ancient egyptians : Examples of burial art to that of the Ancient Egyptians

User Account

All Pages