Assume the spot rate between the uk and the US is .€ .6789= $1 while the one year Foward rate is €.6782=$1. The risk free rate in the UK is 3.1 percent. The risk free rate in the U.S is 2.9 percent. How much profit can you earn for the year on a loan of $1,500 by utilizing covered interest abitrage?
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Assume the spot rate between the uk and the US is .€ .6789= $1 while the one year Foward rate is €.6782=$1. The risk free rate in the UK is 3.1 percent. The risk free rate in the U.S is 2.9 percent. How much profit can you earn for the year on a loan of $1,500 by utilizing covered interest abitrage?
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- The spot rate between the U.K. and the U.S. is £.7534/$, while the one-year forward rate is £.7524/$. The risk-free rate in the U.K. is 4.27 percent and in the United States is 2.58 percent. How much in profit can you earn on $9,000 utilizing covered interest arbitrage?Suppose that the current EUR/GBP rate is 0.6674 and the one-year forward exchange rate is 0.6748. The one-year interest rate is 1.4% in euros and 3.4% in pounds. You can borrow at most €1,000,000 or the equivalent pound amount. Suppose you are a Euro-based investor. Determine the profit/loss (in EUR, no cents) if you borrow locally and invest in poundsSuppose that the current EUR/GBP rate is 0.6668 and the one-year forward exchange rate is 0.6742. The one-year interest rate is 1.8% in euros and 3.6% in pounds. You can borrow at most €1,000,000 or the equivalent pound amount. Suppose you are a pound-based investor. Determine the profit/loss (in GBP, no cents) if you borrow locally and invest in Euros.
- You are an American investor who can borrow $1,000,000 or the equivalent amount in euros today. Suppose the spot rate is $1.18/€, and the one-year forward rate is $1.15/€. The annual interest rate is 4 percent in the U.S. and 2 percent in Germany. Check if IRP holds. If it does not hold, set up a covered interest arbitrage. What will be your profit from this arbitrage opportunity in dollars?The 1 year (lending or borrowing) rate in the UK is 8%; the 1 year (lending or borrowing) rate in the United States is 5%. Currently the spot exchange rate if $1.81 per British pound; the 1 year forward rate is $1.79 per British pound. If you are able to borrow $1,000,000 in the US to lend (as British pounds) in the UK, how much a risk free profit can you create over the next year? Give typing answer with explanation and conclusionA European firm borrows MXN from a Mexico bank at a 7% interest rate. Over that same time, the Euro appreciates 2.70% against the MXN. What is the European firm's €-denominated equivalent cost of borrowing?
- Currently, the spot rate is RM4.2000/USD and the one year forward rate is RM4.1000/USD. Interest rate in United States is 3% per annum and in Malaysia is 2% per annum. Assume that you can borrow as much as USD100,000 or RM420,000 for your coming project. If Interest Rate Parity (IRP) is not holding, determine how would you carry out covered interest arbitrage (CIA) and compute the profit.The 6-month interest rate in the US is 12.25% p.a. The 6-month interest rate in Canada is 15.25% p.a. The spot rate is US$0.8203/Canadian$ and the 6-month forward rate is US$0.8113/Canadian$. For a transaction size of US$700,000, how can an investor take advantage of the situation without taking undue risks? Ignore transaction costs and income taxesSulliver Travel Agency thinks interest rates in Europe are low. The firm borrows euros at 7 percent for one year. During this me period, the dollar falls 11 percent against the euro. What is the effective interest rate on the loan for one year? (Consid me 11 percent fall in the value of the dollar as well as the interest payment.) ote: Compute your answer from a U.S. perspective. Input your answer as a whole percent. Effective interest rate %
- Using the UIP equation, assume that the expected future rate (after one year) for euros (in terms of dollars) equals $1.20, while the current spot rate is 1.15. The current interest rate on euro deposits is 2%, and the interest rate on dollar deposits is 3%. Should you invest in the US or in Europe? Neither one In the US In Europe It is indifferentSuppose that the annual interest rates on 6-months borrowing in Romania and the United States are 12.7 % and 0.8 %, respectively. The current spot rate RON/US$ is 4.00 and 6-months forward rate RON/US$ is 4.21. Does interest rate parity hold? Would it be as a result of covered or uncovered interest arbitrage, why? Determine arbitrage potential in b) using spot rate after six months of RON/US $= 4.25 rather than 6-months forward rate.The spot rate between Canada and the U.S. is Can$1.2398/$, while the one-year forward rate is Can$1.2397/$. The risk-free rate in Canada is 4.31 percent and risk-free rate in the United States is 2.60 percent. How much in profit can you earn on $6,500 utilizing covered interest arbitrage? Multiple Choice $89.36 $110.60 $97.73 $124.43 $111.70 part B, The annual inflation rate in the U.S is expected to be 2.68 percent and the annual inflation rate in Poland is expected to be 4.21 percent. The current spot rate between the zloty and dollar is Z4.0992/$. Assuming relative purchasing power parity holds, what will the exchange rate be in four years? Multiple Choice Z4.2902/$ Z4.3559/$ Z3.8540/$ Z3.9139/$ Z4.2256/$