Please show your calculations for each question.

Assume the current U.S. dollar-British spot rate is 0.6993/$. If the current nominal one-year interest rate in the U.S. is 5% and the comparable rate in Britain is 6%, what is the approximate forward exchange rate for 360 days?

a)

0.6993/$

b)

1.43/$

c)

1.42/$

d) 0.7060/$

2) A foreign exchange trader at J.P. Morgan Chase, can invest $10 million, or the foreign currency equivalent of the bank's short term funds, in a covered interest arbitrage with Denmark. Using the following quotes of exchange rate and annual interest rate, can he/she make covered interest arbitrage (CIA) profit?

Assumptions				Value
Arbitrage funds available				$10,000,000
Spot exchange rate (kr/$)				6.1920
3-month forward rate (kr/$)				6.2350
Expected future spot rate (Kr/$)				6.2400
US dollar 3-month interest rate				3.000%
Danish kroner 3-month interest rate				6.000%

a)		$2,500.00
b)		$5,000.00
c)		Kr 9,599.99
d)		Kr 681,600

3)

Assume the current U.S. dollar-yen spot rate is 90 /$. Further, the current nominal 180-day rate of return in Japan is 1% and 2% in the United States. What is the approximate forward exchange rate for 180 days?

	a)	89.55/$
		b) 90.45/$
	c)	89.12/$
	d)	90.89/$