Reference no: EM131850095

1. The nominal annual interest rate on 6-month U.S. Treasuries is 0.04% (i.e., the semiannual return is 0.02%). The spot rate of the British pound is $1.5400 (£0.6494 per U.S. dollar) and the 6-month forward rate of the British pound is $1.4982 (£0.6675 per U.S. dollar). If interest rate parity holds, what is the nominal annual interest rate on default-free 6-month British bonds? Round to 4 decimal places.

2. The nominal annual interest rate on 6-month U.S. Treasuries is 0.08% (i.e., the semiannual return is 0.04%). The spot rate of the British pound is $1.6901 (£0.5917 per U.S. dollar) and the 6-month forward rate of the British pound is $1.5000 (£0.6667 per U.S. dollar). If interest rate parity holds, what is the nominal annual interest rate on default-free 6-month British bonds?

You MUST round you answer to four decimal places

3. A U.S. consumer observes that a golf club costs $500. Currently in the spot market, 1 euro can be exchanged for $1.7521. If purchasing power parity (PPP) holds, how many euros should you expect to pay for the same golf club in Europe?

You MUST round you answer to two decimal places.

4. A U.S. consumer observes that a golf club costs $500. Currently in the spot market, 1 euro can be exchanged for $1.1012. If purchasing power parity (PPP) holds, how many euros should you expect to pay for the same golf club in Europe?

You MUST round you answer to two decimal places