If the interest rate in the Japan is 5%, the interest rate in the U.S. is 10%, the spot exchange rate is 120 Japanese yens per U.S. dollar, what must be the forward exchange rate to prevent covered interest arbitrage?
The inflation rate in the U.S. is projected at 6% per year for the next several years. The Australian inflation rate is projected to be 2% during that time. The exchange rate is currently A$2.2. Based on relative purchasing power parity, what is the expected exchange rate in two years?
The British pound trades at $1.9735 in London and $1.9684 in New York. How much profit could you earn on each trade with $10,000?
This question was answered on: May 23, 2022
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