Question: Continue with the data from the question above.Using the formula for Interest rate parity, F 1 =S 0 (1+R Quote Currency )/(1+R Base Currency )

Continue with the data from the question above.Using the formula for Interest rate parity,

F1=S0(1+RQuote Currency)/(1+RBase Currency),

what one-year Forward Rate should prevail in the market?

Select one:

a. AUD/CAD = 0.9321

b. AUD/CAD = 0.9280

c. AUD/CAD = 0.9245

d. AUD/CAD = 0.9200

e. AUD/CAD = 0.9176

(I know the answer is 0.9321, I just want someone to show me the calculation, Thanks).

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

Covered interest arbitrage is a well-known strategy for capitalizing on mispricing in the market. The strategy involves borrowing money today in one's home currency, selling the domestic currency in...

Q:

A1 xv fx A B D E F G H H I 5 5 6 7 Mark Collins, luthier and businessman, builds and sells custom-made acoustic and electric stringed instruments. Although located in Maryville, Tennessee, he 8...

Q:

a-What would be the $SDR bid if the SDR appreciates 15% against the dollar? What would be the SDR/$ offer rate if the SDR appreciates 15%? SDR is Special Drawing Rights, a basket currency precursor...

Q:

Attached are questions you will need to answer based on creating a multinational corperation (MNC). You will need to pick the United States and Germany. The U.S is the home land and Germany is the...

Q:

The mechanics of exchange rate arithmetic, though fundamentally simple, can be confusing for those not using it on a regular basis. The questions below are designed to provide practice in the more...

Q:

11/26/2018 Chapter: 17 Problem: Mark Collins, luthier and businessman, builds and sells custom-made acoustic and electric stringed instruments. Although located in Maryville, Tennessee, he purchases...

Q:

1. A spot trade in FX is a trade made today and settled two days in the future. A forward trade is an agreement made today to exchange currencies at a future date. Using the current spot rate of...

Q:

AHedging Currency Risks at AIFS Christopher Archer-Lock, London-based controller for student exchange organization American Institute for Foreign Study (AIFS) talked almost daily with his...

Q:

can I ask for question F? The answer should fill in at the table 8 You are the manager of a U.S. company situated in Los Angeles and manages the import/export division of the company. The company...

Q:

please answe question 8 asap You are the manager of a U.S. company situated in Los Angeles and manages the import/export division of the company. The company distributes (resells) a variety of...

Q:

Q4 (a) Blue Ocean Bhd (OCB), a seaport operator is planning to acquire Fast Mover Bhd (FMB), an haulage transport operator. The acquisition aims to intergrate and expand supply chain business of the...

Q:

Other information is available as follows: i) Annual subscription in arrears is Rs.200 ii) Wages outstanding Rs.60 iii) Rs.120 is to be written off as depreciation on furniture. The following is the...

Q:

The Foundatienal 4 5 ( Algo ) ( LOH 1 - 2 , LOH - 3 , LOH - 4 , LON - 5 , LOH 1 6 ) ( The following information applies fo the guestions diyplayed below ) Cane Compary manufactures two products...

Q:

A hula hoop and solid disc of equal radii are rolled, from rest and without slipping, down an incline plane. Which one will reach the bottom of the inclined plane first? Explain.

Q:

Interview two managers. Ask them what criteria are used for their performance appraisal. Are the criteria verifiable? Do these managers think that the performance evaluation measures their...

Q:

Develop a 10-year professional career plan for yourself. Identify a personal profile for yourself and state your longrange personal and professional goals. What are your strengths and weaknesses?...

Q:

What are some of the first examples of emergency management?