Use the Information below to answer the following question. Se ($/ €) F360 ($/ €) Exchange Rate $1.60 = €1.00 $1.58 = €1.00 Interest Rate is ie APR 2% 4% f you had €1,000,000, traded them for USD at the spot rate, and Invested those dollars in the U.S., how many USD will you get in one year?
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- Suppose exchange rate of Japanese yen in US $ is $.010, exchange rate of euro in US $ is $1.34, and exchange rate of euro in Japanese yen is 139 yen and you have $100, 000 to invest. By looking the exchange rates, do you see triangular arbitrage opportunity? What is your profit or loss? Show the work to support your answer.Assume the following exchange rates: Currencies Exchange Rate MXN/USD 0.0470 MXN/JPY 5.2300 JPY/USD 0.0088 Is triangular arbitrage possible? If so, how much is your profit in USD if you start with $1,000,000?Suppose you have the following spot exchange rates: USD/AUD 0.5300 AUD/EUR 1.6428 USD/EUR 0.8782 a) Calculate the US dollar profit (per 1 USD), if any, on a three-point arbitrage. b) Calculate AUD profit (per 1 AUD), if any, on a three-point arbitrage. c) How can you explain the answers in (1) and (2)?
- Suppose the current USD/EUR spot exchange rate is 1.20$/ €. At the same the euro interest rate amount to 10% per year while the dollar interest rate is 0% per year. a. What is the no-arbitrage one-year USD/EUR forward exchange? b. Suppose the one-year USD/EUR forward exchange was 1.25$/ €. How could you make money from this situation? 42. Assume the following exchange rates: Currencies MXN/USD MXN/JPY JPY/USD Is triangular arbitrage possible? If so, how much is your profit in USD if you start with $1,000,000? Exchange Rate 0.0470 5.2300 0.0088d) You observe the following exchange rates in the market. i) $1 = 0.85 euros and 1 krona = $ 0.13. Find the cross exchange rate between euro and krona, that is, how many euros do you receive for every krona exchanged?
- If the exchange rate at time t is Et = €1/$. You invest $1 in an euro asset at t, which has an interest of 8%. When the asset expires at t+1, you get paid € (x.xx round to two decimal places). If dollar appreciates by 2 % against euro, that is, Et+1 /$(x.xx round to two decimal places), then you can buy back $ (x.xx round UP to two decimal places). Blank # 1 Blank # 2 Blank # 3 MacBook Pro |米 G Search or type URL %24 & 7 80 09Suppose that the current spot exchange rate is €2.62/OMR and the one year forward exchange rate is €2.65/OMR. The one year interest rate is 6 in Euros and 5 in Oman. You can borrow OMR 1,000,000 or the equivalent in euro at the current spot exchange rate? Assume you are Omani based investor? Find Interest rate parity of €/OMR Show how you can realize guaranteed profit from covered interest? How much the size of arbitrage profit in OMR?Suppose that the current spot exchange rate is €0.85 per $ and the three-month forward exchange rate is €0.8313 per $. The three- month interest rate is 5.60 percent per annum in the United States and 5.40 percent per annum in France. Assume that you can borrow up to $1,000,000 or €850,000. Required: a. How will you realize a certain profit via covered interest arbitrage, assuming that you want to realize profit in terms of U.S. dollars? What will be the size of your arbitrage profit? b. Assume that you want to realize profit in terms of euros. Show the covered arbitrage process and determine the arbitrage profit in euros. How will you realize a certain profit and size of your arbitrage profit? Complete this question by entering your answers in the tabs below. Required A Required B How will you realize a certain profit via covered interest arbitrage, assuming that you want to realize profit in terms of U.S. dollars? What will be the size of your arbitrage profit? Note: Do not round…
- Suppose that the interest rates in the U.S. and Germany are equal to 5%, that the forward (one year) value of the € is F$/€ = 1$/€ and that the spot exchange rate is E$/€ = 0.75$/€. Please answer the following questions by explaining all steps of your analysis: Does the covered interest parity condition hold? Why or why not? How could you make a riskless profit without any money tied up assuming that there are no transaction costs in buying and or selling foreign exchange? PLEASE SHOW ALL STEPSSuppose exchange rates are: EUR/AUD = 1.5550 GBP/AUD = 2.8923 GBP/EUR = 1.8600 Starting with 10,000 AUD, what are the one-round-trip arbitrage profits rounded to the nearest AUD? 14,180 AUD No arbitrage profit is possible. 1,961 AUD 73,654 AUDSuppose that the current spot exchange rate is €1.72 per £ and the one-year forward exchange rate is €1.80 per £. The one-year interest rate is 5.4% in euros and 5.2% in pounds. You can borrow at most €1,000,000 or the equivalent pound amount, i.e., £581,395, at the current spot exchange rate. Required: a. If you are a euro-based investor, how can you realize a guaranteed profit from covered interest arbitrage and the size of arbitrage profit? b. How will the interest rate parity be restored as a result of the above transactions? c. If you are a pound-based investor, what is the covered arbitrage process and the size of the arbitrage profit? Complete this question by entering your answers in the tabs below. Required A Required B Required C If you are a euro-based investor, how can you realize a guaranteed profit from covered interest arbitrage and the size of arbitrage profit? Note: Do not round intermediate calculations. Round off the final answer to nearest whole dollar. Profit from…