Question

1)We know that the yen and the swiss franc have a 120yen/ sf 1 exchange rate, meaning one swiss franc buys 120 yen in the spot ER market. If the swiss franc has an interest rate of .06 and the yen rate is -.02, what is the forward exchange rate for IPT (interest parity theory) to be attained? Show everything in yen terms, i., e., how much yen one Swiss franc buys (yen is in the numerator.)

2) If there is no equilibrium initially, will there be equilibrium eventually? If so, what will transpire?

Answer #1

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We know that the yen and the swiss franc have a 120yen/
sf 1 exchange rate, meaning one swiss franc buys 120 yen in the
spot ER market. If the swiss franc has an interest rate of .06 and
the yen rate is -.02, what is the forward exchange rate for IPT
(interest parity theory) to be attained? Show everything in yen
terms, i., e., how much yen one Swiss franc buys (yen is in the
numerator.) If there is...

We know that the yen and the Swiss franc have a 100 yen/ sf 1
exchange rate, meaning one swiss franc buys 100 yen in the forward
ER market. If the swiss franc has an interest rate of -.06 and the
yen rate is -.02, what is the spot exchange rate for IPT (interest
parity theory) to be attained ? Show everything in yen terms and
franc terms. 2) If there is no equilibrium initially, will there be
equilibrium eventually?...

A.1)We know that the yen and the Swiss franc have a 100 yen/ SF
1 exchange rate, meaning one swiss franc buys 100 yen in the
forward ER market. If the Swiss franc has an interest rate of -.06
and the yen rate is -.02, what is the spot exchange rate for IPT
(interest parity theory) to be attained? Show everything in yen
terms and franc terms. 2) If there is no equilibrium initially,
will there be equilibrium eventually? If...

The spot rate for the Swiss Franc is $1.0550/SF and the one-year
forward rate is $1.0650/SF. The expected one year interest rates
are 6% p.a. for the US and 4% p.a. for Switzerland. Using the above
rates, can you engage in a covered interest rate arbitrage as an
American investor? Use either $1,000,000 or SF 1,000,000 as the
notational amount. Show any profits in dollars.

The forward rate of the Swiss franc (SF) is $0.50. The spot rate
of the Swiss franc is $0.48. The following interest rates
exist:
U.S.
Switzerland
360-day borrowing rate
7%
5%
360-day deposit rate
6%
4%
Kriner Inc. needs to purchase SF200,000 in 360 days.
Determine the amount of U.S. dollars needed in 360 days if
Kriner Inc. uses a money market hedge.
Group of answer choices
$96,914
$101,904
$101,923
$92,307
$98,770

One year ago, the spot exchange rate between Japanese yen and
Swiss franc was S_1Y/SFR = ¥160/SFr/ Today, the spot
rate is S_0 ^¥/Sfr = ¥155/SFr. Inflation during the year was p^¥ =
2 percent and p^SFr= 3 percent in Japan and Switzerland,
respectively.
a.) What was the percentage change in the nominal value of the
Swiss franc?
b.) One year ago, what nominal exchange rate would you have
predicted for today based on the difference in inflation rates?
c.)...

In early 2012, the spot exchange rate between the Swiss Franc
and U.S. dollar was 1.0404 ($ per franc). Interest rates in the
U.S. and Switzerland were 1.35% and 1.10% per annum, respectively,
with continuous compounding. The three-month forward exchange rate
was 1.0300 ($ per franc). What arbitrage strategy was possible? How
does your answer change if the exchange rate is 1.0500 ($ per
franc).

The one-year forward rate for the Swiss franc is SF1.1617/$. The
spot rate is SF1.1731/$. The interest rate on a risk-free asset in
Switzerland is 2.99 percent. If interest rate parity exists, what
is the one-year risk-free rate in the U.S.?
Multiple Choice
3.20%
1.99%
3.50%
3.75%
4.00%

Suppose that the US dollar interest rate and the Swiss Franc
interest rate are the same, 5 percent per year, but that there is a
risk premium of 1 percent associated with holding Swiss Franc
rather than US dollars over the year. (a) What is the relationship
(in percentage terms) between the current equilibrium dollar/franc
exchange rate and its expected future level? (b) If the expected
future exchange rate is $1.12 per franc, what is the equilibrium
dollar/franc (spot) exchange...

Initially the US interest rate is 9% per year and the Swiss
interest rate is 5% per year, The current spot rate is $0.5/SF and
in the next 90 days it is expected to be about $0.505/SF. The franc
is expected to appreciate by 1% in the next 90 days so the annual
rate of expected increase is 4%. Assume uncovered interest parity
holds at these rates. Describe what happens to the spot rate if US
interest rate changes from...

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