Assume the spot rate on the Singapore Dollar is .6920 and the 6-month forward rate is .6929. Also assume interest rate parity holds and the current annual risk-free rate in the United States is 3.3 percent. What must the six-month risk-free rate be in Singapore?

Q: The nominal interest rate in US is 3.5% and 5.5% in Canada, and expected inflation in US is 3% and…

A: To calculate the interest rate parity, interest rate are used. To calculate the purchasing power…

Q: st rates in the U.S. andeuro are 4% and 6% respectively and the spot rate for Euro ($/€) is $1.1550,…

A: According to interest rate parity the forward rate and spot exchange rate both should be in…

Q: (c) If the one-year interest rate on a dollar denominated Treasury bill is 4.5% p.a. and that on a…

A: The interest rate parity indicates that the forward premium or discount on currency exchange should…

Q: Suppose that you are a U.S.-based importer of goods from the United Kingdom. You expect the value of…

A: In this we have to calculate no arbitrage price according to interest rate parity principles.

Q: Suppose the dollar interest rate and the pound sterling interest rate are the same, 6 percent per…

A: A rate through which individuals or companies convert their domestic currency with the other…

Q: Assume that the international Fisher effect (IFE) holds. The initial Singapore dollar spot rate is…

A: International fisher effect is a sub theory of interest rate parity which says that the spot and…

Q: Suppose that the annual interest rates on 6-months borrowing in Romania and the United States are…

A: interest rate in Romania =12.7% interest rate in US =0.8% Spot rate =4 RON/US$ Six  forward months…

Q: pose the annual interest rates in the U.S. (home nation) and the U.K (foreign nation) are 8% and 6%,…

A: There are benefits due to change in the exchange rate change over period of time.

Q: Currently, you canexchange 1 euro for 1.25 dollars in the 180-dayforward market, and the risk-free…

A: Interest rate parity states that after adjusting for risk, investors would expect to receive the…

Q: Suppose the current exchange rate is $1.42/€, the interest rate in the United States is 4.0%, the…

A: For the computation of both, N(d1) as well as N(d2) use:

Q: Suppose the current exchange rate is $1.77/E, the interest rate in the United States is 5.08%, the…

A: Here, To Find: Part a. Forward Exchange rate =? Part b. d1 and N1 =? Part c. d2 and N2 =? Part d.…

Q: Suppose the U.S. yield curve is flat at 4% and the euro yield curve is flat at 3%. The current…

A: The rate that is determined by the contracting parties of a swap is known as swap rate. The swap…

Q: -Suppose we observe the following 1-year interest rates: i Turkey = 10% i USA = 2% The exchange rate…

A: According to interest rate parity theorem, exchange rate in the future is derived by the interest…

Q: Six-month T-bills have a nominal rate of 7%, while default-free Japanese bonds that mature in 6…

A: Interest rate parity refers to the theory which tells us that the interest rate differences or…

Q: Suppose the US yield curve is flat at 5% and the euro yield curve is flat at 4%. The current…

A: Cost Accounting: It is the process of collecting, recording, analyzing the cost, summarizing cost,…

Q: Hong Kong fixes its exchange rate with the US$ at HK$7.8/US$, but the financial market expects a 10%…

A: Interest Rate Differential is the difference in the interest rate of two currencies. Or in simple…

Q: Suppose the current exchange rate for the Polish zloty is Z3.37. The expected exchange rate in 5…

A: Purchasing power parity is defined as the metric, which is used by macro-economic analysts to…

Q: Suppose that the annual interest rates on 6-months borrowing in Romania and the United States are…

A: Interest rate parity - It states that interest rates across the globe should be the same i.e.…

Q: Suppose that the one-year U.S. interest rate is 8% and the equivalent one-year India interest rate…

A: Given, The one-year US interest rate is 8%. The one-year interest rate in India is 12%.

Q: Suppose Kenya is expecting 8% inflation rate during the next one year as compared to 3% inflation…

A: Kenya: USA:

Q: Assume that the four-year annualized interest rate in the United States is 9 percent and the…

A: According to interest rate parity theorem the currency with higher interest rate will sell in…

Q: Suppose that the Eurozone is the domestic country and the United States is the foreign country. The…

A: Forward exchange rate With domestic country inflation (ID), foreign country inflation (IF), period…

Q: With regard to hedging and forecasting, a Eurozone firm is expecting a receivable of $1 million in…

A: Exchange rate facilitates to convert one currency into another.

Q: 1.A research institution has just published projected inflation rates for the United States and…

A: The interest rate parity is a no-arbitrage situation where the future exchange rate between the…

Q: The spot rate for the Japanese yen currently is A??Y107 per $1. The one-year forward rate is A??Y106…

A: Given:Spot rate for japanese currently yield=107 per $1One year forward rate is 106 per $1Risk free…

Q: Let the spot rate be Yen 100 / $ and the 3-month forward rate be Yen 99/$. Compute the interest rate…

A: Interest rate differentials are generally used to determine the difference between the rate of…

Q: Assume that the U.S. interest rate is 7 percent and the euro’s interest rate is 4 percent. Assume…

A: US interest rate = 7% Euro's interest rate (e) = 4% Euro's forward rate (f) = 2%

Q: Suppose that the spot price of a Canadian dollar is U.S. $0.89 and that the exchange rate has a…

A: Spot price : The spot price is the current market price at which a certain asset can be bought or…

Q: Assume that Ghanaian inflation rate is expected to average about 9% annually, while the Nigerian…

A: If an investor or other person wants to exchange one currency with the other currency then the rate…

Q: Assume Switzerland has a one-year interest rate of 3% and that of Ghana is 16%. If the International…

A: The theory of International Fisher's Effect suggests that the spot exchange rate should change to…

Q: If the nine-month forward rate F9(Y/$) = 82, and the inflation rate in the U.S. and Japan are 1.6%…

A: The question is based on the concept of purchasing power parity (PPP) and forward exchange rate.…

Q: Assume the spot rate on the New Zealand dollar is NZ$1.0926, the risk-free nominal rate in the U.S.…

A: Forward rate ( NZ$, US$ ) = Spot rate ( NZ$, US$ ) * [ 1 + Interest rate NZ $ ]n / [ 1 + Interest…

Q: a are given that the annual Australian dollar interest rate is 1% and the erest rate is 2.5%. The…

A: In this we will use the interest parity principle to get the forward rate

Q: Ghana’s inflation is forecasted to be 10.2% over the coming year whilst that of South Africa is…

A: Exchange rate risk exposure is the financial exposure that an individual or business entity faces…

Q: Suppose that last year, the 12-month interest rates for the Australia and the Greece are 2.4% and…

A: The forward exchange rate is used to find out the exchange rate between two currencies in the future…

Q: The spot rate between Japan and the U.S. is ¥100.37 = $1, while the one-year forward rate is ¥99.97…

A: Interest rate parity Interest rate parity refers to the state where forward exchange rate is…

Q: Assume that the Ghanaian inflation rate is expected to average about 9% annually, while the Nigerian…

A: Purchasing power parity It is a measuring of the prices in various other countries that utilizes the…

Q: Assume that interest rate parity holds and that 90-day risk-free securities yield 3% in the United…

A: The conceptual formula used:

Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.