4. Suppose, the INR65.4015/USD in the FX Market. The selling price of the basic SONY LED TV is USD 75 in US, while in India the same TV is sold for 5,300 INR. What should be the forward rate USD/INR to valid the PPP? If the PPP is not valid what are the necessary steps to get the equilibrium in US and Indian markets?
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4. Suppose, the INR65.4015/USD in the FX Market. The selling price of the basic SONY LED TV is USD 75 in US, while in India the same TV is sold for 5,300 INR. What should be the forward rate USD/INR to valid the PPP? If the PPP is not valid what are the necessary steps to get the equilibrium in US and Indian markets?
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- Currently, Interest rate in the US is 3% and interest rate in Japan is 5%, According to the IRR, which of the following is correct? A.in forward market, the value USD should be higher than the value of USD in spot market by about 2%. In other words, USD should exhibit a forward premium of about 2% over JPY 8. in forward market, the value JPY should be higher than the value of JPY in spot market by about 2%. In other words, JPY should exhibit a forward premium of about 2% over JPY. C. the value of USD in spot market wil ise by about 2% against JPY in the future. D. the value of JPY in spot market wil rise by about 2% against USD in the futureA financial institution has just sold 1,000,000 6-month European call options on the Japanese yen. Suppose that the spot exchange rate is 0.80 cents per yen, the exercise price is 0.81 cents per yen, the risk-free rate on the US dollar is 2.5% per annum, the risk-free rate in Japan is 0.5% per annum, and the volatility of the yen is 10% per annum. Calculate the delta (D), gamma (G), vega (n), theta (Q), and rho (r) of the financial institutions' position. Interpret with an explanatory sentence the meaning of each of the calculations.Assume the following quotes: Citibank quotes U.S. dollars per pound at $1.5400/£ National Westminster quotes euro per pound at €1.6000/£ Deutsche bank quotes dollars per euro at $0.9700/€ Is there an arbitrage opportunity based on these quotations? If so, show how a market trader with one million $ (1,000.000 $) can make an inter-market arbitrage profit, and calculate that profit.
- In the spot market, 1 Philippine peso can be exchanged for 2.51 Japanese yen. In the 1-year forward market, 1 Philippine peso can be exchanged for 2.53 Japanese yen. The 1-year, risk-free rate of interest is 5 percent in the Philippines. If interest rate parity holds, what is the yield today on 1-year, risk-free Japanese securities?Suppose that a French firm would like to have its stock available through an American Depository Receipt (ADR). If the firm’s stock is currently selling for €75 and that the exchange rate between the € and the $ is €1.0=$1.0592. What price should we expect for the ADR in US dollars? Suppose that over the next year the dollar reaches parity with the Euro, i.e., $1.00=€1.00 and that the price of the French firm’s stock rises to €100. What would expect the price of the ADR to be?The New Zealand dollar to U.S. dollar exchange rateis 1.38, and the British pound to U.S. dollar exchangerate is 0.65. If you find that the British pound toNew Zealand dollar is trading at 0.5, what would bethe riskless profit per U.S. dollar invested?
- Assuming the following quotes: Citibank quotes U.S. dollars per pound at $1.5400/£ National Westminster quotes euro per pound at €1.6000/£ Deutsche bank quotes dollars per euro at $0.9700/€ Is there an arbitrage opportunity based on these quotations? If so, show how a market trader with one million $ (1,000.000 $) can make an inter-market arbitrage profit, and calculate that profit.Suppose that the spot price of a Canadian dollar is U.S. $0.89 and that the exchange rate has a volatility of 7% per year. Risk-free interest rates are 6% in the U.S. and 4% in Canada. Calculate the price of a 6-month European call option to buy one Canadian dollar for U.S. $0.89. Express your answer in terms of the cumulative normal distribution function, N(x), as in the answers to question 16 in part 1. What is the price of a 6-month option to buy U.S. $0.89 for one Canadian dollar? Please show all your work! Thank you SO muchAssume that relative Purchasing Power Parity holds. Also assume that the inflation rate over the coming year is expected to be 6% in the U.S. and 2% in Norway and that the current spot rate of the Norwegian krone (NOK) is $0.11. If your company plans to import 10 million NOK of product from Norway over the coming year, how many U.S. dollars will it need to pay if it plans to convert USD to NOK one year from now?
