User Account

All Pages

Find the 1-year forward exchange rate

Assignment Help Basic Computer Science
Reference no: EM131823469

The table below shows the information for exchange rates, interest rates and inflation rates in the US and Germany. Answer the following questions

Current spot rate:             $1.40/€

One-year forward rate:     $1.45/€

Interest rate in the US:      3%

Interest rate in Germany:  5%

Inflation rate in the US:     2%

Inflation rate in Germany: 4%

(b) Find the 1-year forward exchange rate in $ per € that satisfies IRP (interest rate parity) from the perspective of a customer that borrowed $1000 traded for € at the spot and invested in Germany.

(c)There is one profitable arbitrage at these prices. How to conduct the covered interest arbitrage if you can either borrow $1000 in the US or €1000 in Germany? What would be the profit?

(d)Explain how the IRP (interest rate parity) will be restored as a result of covered arbitrage activities.

(g) Is it the forecasted by IFE future spot rate (in (f) above) the same as the one forecasted by relative PPP (in (e) above) ? If yes, why so, if no, why not?

Reference no: EM131823469

Questions Cloud

Discussion about the cloud computing in an organization : Determine whether or not government agencies such as the National Security Agency (NSA) or Central Intelligence Agency (CIA) would be good candidates.
Account today that earns : Suppose you deposit $1,061.00 into an account today that earns 14.00%. It will take ___ years for the account to be worth $2,708.00.
Provide an overview of either bandura or kelly theory : Question - Emotional and Cognitive View - For this discussion, provide an overview of either Bandura's or Kelly's theory of personality development
Annualized yield based on an annual effective yield : What is the annualized yield based on an Annual Effective Yield (EAR or AER or compound) basis?
Find the 1-year forward exchange rate : Find the 1-year forward exchange rate in $ per € that satisfies IRP (interest rate parity) from the perspective of a customer that borrowed.
Create a random bit string using given information : Suppose that someone suggests the following way to confirm that the two of you are both in possession of the same secret key.
Write a project introduction and a project plan : You are currently the Chief Information Officer (CIO) for an innovative Internet-based company with gross revenues of more than $35 million dollars per year.
Describe the diathesis-stress model : Describe the diathesis-stress model (or gene-environment interaction model) as it has been applied to the development
How the fed should respond to prevailing conditions : How the Fed Should Respond to Prevailing Conditions. Consider the existing economic conditions, including inflation and economic growth.

Reviews

Write a Review

Basic Computer Science Questions & Answers

  Identifies the cost of computer

identifies the cost of computer components to configure a computer system (including all peripheral devices where needed) for use in one of the following four situations:

  Input devices

Compare how the gestures data is generated and represented for interpretation in each of the following input devices. In your comparison, consider the data formats (radio waves, electrical signal, sound, etc.), device drivers, operating systems suppo..

  Cores on computer systems

Assignment : Cores on Computer Systems:  Differentiate between multiprocessor systems and many-core systems in terms of power efficiency, cost benefit analysis, instructions processing efficiency, and packaging form factors.

  Prepare an annual budget in an excel spreadsheet

Prepare working solutions in Excel that will manage the annual budget

  Write a research paper in relation to a software design

Research paper in relation to a Software Design related topic

  Describe the forest, domain, ou, and trust configuration

Describe the forest, domain, OU, and trust configuration for Bluesky. Include a chart or diagram of the current configuration. Currently Bluesky has a single domain and default OU structure.

  Construct a truth table for the boolean expression

Construct a truth table for the Boolean expressions ABC + A'B'C' ABC + AB'C' + A'B'C' A(BC' + B'C)

  Evaluate the cost of materials

Evaluate the cost of materials

  The marie simulator

Depending on how comfortable you are with using the MARIE simulator after reading

  What is the main advantage of using master pages

What is the main advantage of using master pages. Explain the purpose and advantage of using styles.

  Describe the three fundamental models of distributed systems

Explain the two approaches to packet delivery by the network layer in Distributed Systems. Describe the three fundamental models of Distributed Systems

  Distinguish between caching and buffering

Distinguish between caching and buffering The failure model defines the ways in which failure may occur in order to provide an understanding of the effects of failure. Give one type of failure with a brief description of the failure

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd