Problem one and two

Determining the Forward Premium Note: Interest rate differential predicts the forward premium (.e. p = in-ip) Returning to our previous example: Australian dollar spot Australian dollar 60-day forward Bid Quote $0.92 $0.90 Deposit Rate 2% (60-day rate=2%(60/360)=0.33% 6% [60-day rate=6%"(60/360)=1%] Ask Quote $0.93 $0.91 Loan Rate 5% [60-day rate-5%(60/360) 0.83%) 8% [60-day rate=8%*(60/360)-1.33%) Interest rate on dollars Interest rate on Australian dollar o Question 1: How much should the Australian dollar 60-day forward premium be at equilibrium? Answer 1: o Question 2: What should the Australian dollar 60-day forward rate be at equilibrium