Use the information below to answer the following questions. Currency per U.S. $ 1.2380 1.2353 Australia dollar 6-months forward Japan Yen 6-months forward U.K. Pound 6-months forward 100.3600 100.0200 .6789 .6784 Suppose interest rate parity holds, and the current six month risk-free rate in the United States is 5 percent. Use the approximate interest rate parity equation to answer the following questions. a. Australian risk-free rate b. Japanese risk-free rate c. Great Britain risk-free rate a. What must the six-month risk-free rate be in Australia? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What must the six-month risk-free rate be in Japan? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. What must the six-month risk-free rate be in Great Britain? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) % % %
Use the information below to answer the following questions. Currency per U.S. $ 1.2380 1.2353 Australia dollar 6-months forward Japan Yen 6-months forward U.K. Pound 6-months forward 100.3600 100.0200 .6789 .6784 Suppose interest rate parity holds, and the current six month risk-free rate in the United States is 5 percent. Use the approximate interest rate parity equation to answer the following questions. a. Australian risk-free rate b. Japanese risk-free rate c. Great Britain risk-free rate a. What must the six-month risk-free rate be in Australia? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What must the six-month risk-free rate be in Japan? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. What must the six-month risk-free rate be in Great Britain? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) % % %
Chapter7: International Arbitrage And Interest Rate Parity
Section: Chapter Questions
Problem 36QA
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Transcribed Image Text:Use the information below to answer the following questions.
Currency per U.S. $
1.2380
1.2353
Australia dollar
6-months forward
Japan Yen
6-months forward
U.K. Pound
6-months forward
100.3600
100.0200
.6789
.6784
Suppose interest rate parity holds, and the current six month risk-free rate in the United
States is 5 percent. Use the approximate interest rate parity equation to answer the
following questions.
a. What must the six-month risk-free rate be in Australia? (Enter your answer as a
percent rounded to 2 decimal places, e.g., 32.16.)
b. What must the six-month risk-free rate be in Japan? (Enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.)
a. Australian risk-free rate
b. Japanese risk-free rate
c. Great Britain risk-free rate
c. What must the six-month risk-free rate be in Great Britain? (Enter your answer as a
percent rounded to 2 decimal places, e.g., 32.16.)
%
%
%
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