What must the six-month risk-free rate be in Australia

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Question - Use the information below to answer the following questions.

Currency per U.S. $

Australia dollar 1.2374 6-months forward 1.2359

Japan Yen 100.3000 6-months forward 100.0800

U.K. Pound 6795 6-months forward 6778

Suppose interest rate parity holds, and the current risk-free rate in the United States is 5 percent per six months. Use the approximate interest rate parity condition to answer this question.

a. What must the six-month risk-free rate be in Australia?

b. What must the six-month risk-free rate be in Japan?

c. What must the six-month risk-free rate be in Great Britain?

Reference no: EM132832650

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