Question 1: You are given foreign currency forecasts for a number of currency pairs in Table 1. You are a forex trader and wish to use the forecasts for September 2021 to make a profit.

Required

(a)

i) Obtain spot rates for five currency pairs chosen from those listed in table 1. Please specify the date and time at which you obtained the quotes.

ii) Which currency pairs indicate profit opportunities if you buy at the spot rate indicated in your answer a) and sold at the predicted rate shown in table 1?

iii) Which currency pair gives the highest rate of return?

(b)

i) Obtain forward rates for five chosen currency pairs from table 1 with a maturity of September 2021.

ii) Compare the forward rates obtained in b) (i) above to the predicted spot rate in Table 1. Assuming that the predictions in Table 1 are accurate, does it point to profit making opportunities? That is can you buy at the forward rate and sell at the forecast spot rate to make a profit? Alternately, can you sell at the forward rate and buy at the predicted spot rate to make a profit? Assume that you have AUD 1 million for the trade and show your profit calculations for three currency pairs.

c) Choose three currency pairs with AUD on one side. Obtain the government interest rates for the three foreign countries on the other side of the forex quotes. Using this data in addition to those obtained in a) and b) above, verify if interest rate parity holds. You may draw additional data if required.

please, answer all parts (a , b ,and c ) and step by step and in a very clear way

Name Bid Ask High Low Chg. - Time EURUSD ON FWD 0.2190 0.2390 0.4800 0.2210 -0.4670 7:18:00 EURUSD TN FWD 0.2200 0.2500 0.2680 0.2350 0.0000 7:19:00 EURUSD SN FWD 0.1800 0.3000 0.2410 0.2390 0.0200 7:19:00 EURUSD SW FWD 1.6500 1.7000 1.7100 1.6700 0.0500 7:19:00 EURUSD 2W FWD 3.2300 3.5600 3.4600 3.3800 -0.0200 7:19:00 EURUSD 3W FWD 5.2900 5.3900 5.3500 5.1600 0.2000 7:17:00 EURUSD 1M FWD 7.9500 8.0900 8.0500 7.6000 0.4500 7:19:00 EURUSD 2M FWD 14.7400 14.9200 15.0800 14.7800 -0.3400 7:19:00 EURUSD 3M FWD 24.3000 25.3500 25.4400 24.6900 -0.6900 7:19:00 EURUSD 4M FWD 32.5800 32.9300 33.4900 32.2800 -0.3800 7:18:00 EURUSD 5M FWD 39.3700 40.1500 40.4100 39.4600 -0.4500 7:19:00 EURUSD 6M FWD 46.7600 48.7100 48.5200 47.2600 -0.7600 7:19:00 EURUSD 7M FWD 55.2300 55.8700 56.0400 55.5600 -0.0900 7:19:00 EURUSD 8M FWD 62.9800 64.1700 64.4800 63.5200 -0.5400 7:19:00 EURUSD 9M FWD 70.4400 73.4400 72.9700 71.7000 -0.8500 7:19:00 EURUSD 10M FWD 79.8000 81.3000 81.8000 80.2100 0.3600 7:19:00 EURUSD 11M FWD 88.3800 89.3800 90.0100 88.2000 0.6900 7:19:00 EURUSD 1Y FWD 96.5700 97.5700 98.5000 96.4800 0.4700 7:19:00 EURUSD 15M FWD 123.5400 125.0400 125.3800 124.3700 0.8100 6:49:00 EURUSD 21M FWD 180.5300 186.9100 180.6800 178.6300 4.0600 6:49:00 EURUSD 2Y FWD 203.6000 210.9200 215.3000 207.5800 -1.2600 6:49:00 EURUSD 3Y FWD 326.7500 332.4500 326.8900 327.8000 3.5500 6:48:00 EURUSD 4Y FWD 456.6200 481.3300 464.1000 471.9000 22.8700 6:49:00 EURUSD 5Y FWD 615.5500 646.8400 627.2000 635.2000 33.8000 6:48:00 EURUSD 6Y FWD 799.0000 816.0000 801.0000 814.0000 36.0000 6:49:00 EURUSD 7Y FWD 985.0000 1010.0000 986.0000 1008.0000 62.0000 6:48:00 EURUSD 8Y FWD 1180.0000 1210.0000 1181.0000 1206.0000 75.0000 6:49:00 EURUSD 9Y FWD 1379.0000 1414.0000 1379.0000 1409.0000 86.0000 6:48:00 EURUSD 10Y FWD 1573.0000 1613.0000 1574.0000 1612.0000 93.0000 6:49:00 EURUSD 12Y FWD 2731.0000 2806.0000 2768.5000 2768.5000 0.0000 15/10 EURUSD 15Y FWD 3139.0000 3239.0000 3189.0000 3189.0000 0.0000 15/10 EURUSD 20Y FWD 3834.0000 3984.0000 3909.0000 3909.0000 0.0000 15/10 Buy Sell AD1 Forex market at a glance Pair Last Open High Low Chg. - Chg.% Time + EUR/USD 1.1722 1.1721 1.1725 1.1703 +0.0004 +0.03% 18:58:05 + GBP/USD 1.2973 1.2913 1.2979 1.2897 +0.0060 +0.46% 18:58:06 USD/JPY 105.39 105.38 105.50 105.34 -0.01 -0.00% 18:58:07 USD/CHF 0.9146 0.9149 0.9166 0.9144 0.0000 +0.01% 18:58:05 + AUD/USD 0.7097 0.7077 0.7108 0.7073 +0.0017 +0.24% 18:58:03 EUR/GBP 0.9035 0.9069 0.9089 0.9023 -0.0033 -0.36% 18:58:04 USD/CAD 1.3182 1.3191 1.3195 1.3169 -0.0005 -0.04% 18:58:03 + NZD/USD 0.6625 0.6603 0.6630 0.6602 +0.0021 +0.32% 18:58:05 + EUR/JPY 123.55 123.54 123.64 123.36 +0.02 +0.02% 18:58:04 + GBP/JPY 136.74 136.17 136.86 135.93 +0.54 +0.40% 18:58:03 Australia 3 Year Government Bond QUOTES & COMPANIES TMBMKAU-03Y (Tullett Prebon) VIEW ALL COMPANIES 1 D 5 D 1M 3M YTD 14 3Y YIELD 4:30 PM AEDT 10/19/20 1 Day Range 0.133 - 0.143 YIELD 0.141% 52 Week Range (Yield) 0.129 - 0.936 (10/07/20 - 12/31/19) 0.15% 0.006 ruhn 0.14% PRICE Coupon 5.500% 113.358 -0.029 (-0.03%) 0.13% Maturity 04/21/23 Oct 13 Oct 14 Oct 15 Oct 16 Oct 19 Open 0.134 Prior Close (Yield) 0.140 1 Day Price Chg TMBMKAU-03Y -0.03% Japan 10 Year -0.03% U.S. 10 Year -0.06% Germany 10 Year 0.05% A DATE OPEN HIGH LOW CLOSE 10/19/20 0.134 0.143 0.133 0.140 10/16/20 0.147 0.147 0.134 0.134 10/15/20 0.153 0.160 0.130 0.147 10/14/20 0.149 0.156 0.147 0.153 10/13/20 0.149 0.152 0.141 0.149 10/12/20 0.149 0.154 0.145 0.149 10/09/20 0.150 0.155 0.141 0.149 10/08/20 0.144 0.163 0.138 0.150 10/07/20 0.173 0.173 0.129 0.144 10/06/20 0.181 0.193 0.171 0.173 10/02/20 0.191 0.191 0.170 0.178 10/01/20 0.170 0.198 0.170 0.191 09/30/20 0.167 0.183 0.167 0.170 09/29/20 0.163 0.172 0.161 0.167 09/28/20 0.175 0.175 0.162 0.163 09/25/20 0.175 0.187 0.167 0.175 09/24/20 0.181 0.193 0.174 0.175 09/23/20 0.217 0.227 0.168 0.181 09/22120 0.236 0.243 0.217 0.217 09/21/20 0.241 0.241 0.233 0.236 QUOTES & COMPANIES Q Australia 1 Year Government Bond TMBMKAU-01Y (Tullett Prebon) VIEW ALL COMPANIES 1D 5D 1M 3M YTD 1 Y 3Y 4:30 PM AEDT 10/19/20 YIELD 1 Day Range 0.104 - 0.110 YIELD 0.106% 52 Week Range (Yield) 0.101 - 0.948 (10/07/20 - 01/02/20) 0.110% -0.004 Marina 0.105% PRICE Coupon 2.000% 102.208 -0.001 (0.00%) 0.100% Maturity 12/21/21 Oct 13 Oct 14 Oct 15 Oct 16 Oct 19 Open 0.110 Prior Close (Yield) 0.106 1 Day Price Chg TMBMKAU-01Y 0.00% Japan 10 Year -0.04% U.S. 10 Year -0.07% Germany 10 Year 0.05% DATE OPEN HIGH LOW CLOSE 10/19/20 0.110 0.110 0.104 0.106 10/16/20 0.111 0.111 0.105 0.110 10/15/20 0.108 0.116 0.105 0.111 10/14/20 0.110 0.113 0.108 0.108 10/13/20 0.109 0.113 0.107 0.110 10/12/20 0.112 0.112 0.106 0.109 10/09/20 0.114 0.116 0.109 0.112 10/08/20 0.109 0.126 0.102 0.114 10/07/20 0.122 0.122 0.101 0.109 10/06/20 0.119 0.130 0.117 0.122 10/02/20 0.126 0.126 0.115 0.121 10/01/20 0.120 0.135 0.120 0.126 09/30/20 0.121 0.128 0.119 0.120 09/29/20 0.122 0.124 0.117 0.121 09/28/20 0.116 0.144 0.116 0.122 09/25/20 0.116 0.127 0.114 0.116 09/24/20 0.140 0.140 0.116 0.116 09/23/20 0.150 0.158 0.139 0.140 09/22/20 0.160 0.163 0.149 0.150 09/21/20 0.161 0.162 0.155 0.160 Table 1: Foreign currency Forecasts: Source NAB September 28, 2020 Exchange rate forecast Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Majors AUD/USD 0.74 0.76 0.77 0.77 0.78 0.79 0.80 0.80 NZD/USD 0.66 0.67 0.68 0.69 0.70 0.70 0.72 0.72 USD/JPY 103 103 100 100 100 99 98 98 EUR/USD 1.22 1.23 1.25 1.26 1.27 1.28 1.30 1.31 GBP/USD 1.36 1.40 1.40 1.43 1.44 1.45 1.47 1.48 USD/CHF 0.91 0.91 0.91 0.91 0.91 0.92 0.91 0.91 USD/CAD 1.32 1.29 1.28 1.28 1.27 1.26 1.25 1.25 USD/CNY 6.70 6.60 6.55 6.50 6.45 6.40 6.35 6.30 Australian Cross Rates AUD/NZD 1.13 1.13 1.13 1.12 1.11 1.12 1.11 1.11 AUD/JPY 76 78 77 77 78 78 78 78 AUD/EUR 0.61 0.61 0.62 0.61 0.62 0.62 0.61 0.61 AUD/GBP 0.54 0.54 0.55 0.54 0.54 0.54 0.54 0.54 AUD/CHF 0.67 0.69 0.70 0.71 0.71 0.72 0.73 0.73 AUD/CAD 0.97 0.98 0.99 0.99 0.99 0.99 1.00 1.00 AUD/CNY 4.96 4.99 5.04 5.03 5.05 5.04 5.06 5.04 Effective 28 September 2020 Name Bid Ask High Low Chg. - Time EURUSD ON FWD 0.2190 0.2390 0.4800 0.2210 -0.4670 7:18:00 EURUSD TN FWD 0.2200 0.2500 0.2680 0.2350 0.0000 7:19:00 EURUSD SN FWD 0.1800 0.3000 0.2410 0.2390 0.0200 7:19:00 EURUSD SW FWD 1.6500 1.7000 1.7100 1.6700 0.0500 7:19:00 EURUSD 2W FWD 3.2300 3.5600 3.4600 3.3800 -0.0200 7:19:00 EURUSD 3W FWD 5.2900 5.3900 5.3500 5.1600 0.2000 7:17:00 EURUSD 1M FWD 7.9500 8.0900 8.0500 7.6000 0.4500 7:19:00 EURUSD 2M FWD 14.7400 14.9200 15.0800 14.7800 -0.3400 7:19:00 EURUSD 3M FWD 24.3000 25.3500 25.4400 24.6900 -0.6900 7:19:00 EURUSD 4M FWD 32.5800 32.9300 33.4900 32.2800 -0.3800 7:18:00 EURUSD 5M FWD 39.3700 40.1500 40.4100 39.4600 -0.4500 7:19:00 EURUSD 6M FWD 46.7600 48.7100 48.5200 47.2600 -0.7600 7:19:00 EURUSD 7M FWD 55.2300 55.8700 56.0400 55.5600 -0.0900 7:19:00 EURUSD 8M FWD 62.9800 64.1700 64.4800 63.5200 -0.5400 7:19:00 EURUSD 9M FWD 70.4400 73.4400 72.9700 71.7000 -0.8500 7:19:00 EURUSD 10M FWD 79.8000 81.3000 81.8000 80.2100 0.3600 7:19:00 EURUSD 11M FWD 88.3800 89.3800 90.0100 88.2000 0.6900 7:19:00 EURUSD 1Y FWD 96.5700 97.5700 98.5000 96.4800 0.4700 7:19:00 EURUSD 15M FWD 123.5400 125.0400 125.3800 124.3700 0.8100 6:49:00 EURUSD 21M FWD 180.5300 186.9100 180.6800 178.6300 4.0600 6:49:00 EURUSD 2Y FWD 203.6000 210.9200 215.3000 207.5800 -1.2600 6:49:00 EURUSD 3Y FWD 326.7500 332.4500 326.8900 327.8000 3.5500 6:48:00 EURUSD 4Y FWD 456.6200 481.3300 464.1000 471.9000 22.8700 6:49:00 EURUSD 5Y FWD 615.5500 646.8400 627.2000 635.2000 33.8000 6:48:00 EURUSD 6Y FWD 799.0000 816.0000 801.0000 814.0000 36.0000 6:49:00 EURUSD 7Y FWD 985.0000 1010.0000 986.0000 1008.0000 62.0000 6:48:00 EURUSD 8Y FWD 1180.0000 1210.0000 1181.0000 1206.0000 75.0000 6:49:00 EURUSD 9Y FWD 1379.0000 1414.0000 1379.0000 1409.0000 86.0000 6:48:00 EURUSD 10Y FWD 1573.0000 1613.0000 1574.0000 1612.0000 93.0000 6:49:00 EURUSD 12Y FWD 2731.0000 2806.0000 2768.5000 2768.5000 0.0000 15/10 EURUSD 15Y FWD 3139.0000 3239.0000 3189.0000 3189.0000 0.0000 15/10 EURUSD 20Y FWD 3834.0000 3984.0000 3909.0000 3909.0000 0.0000 15/10 Buy Sell AD1 Forex market at a glance Pair Last Open High Low Chg. - Chg.% Time + EUR/USD 1.1722 1.1721 1.1725 1.1703 +0.0004 +0.03% 18:58:05 + GBP/USD 1.2973 1.2913 1.2979 1.2897 +0.0060 +0.46% 18:58:06 USD/JPY 105.39 105.38 105.50 105.34 -0.01 -0.00% 18:58:07 USD/CHF 0.9146 0.9149 0.9166 0.9144 0.0000 +0.01% 18:58:05 + AUD/USD 0.7097 0.7077 0.7108 0.7073 +0.0017 +0.24% 18:58:03 EUR/GBP 0.9035 0.9069 0.9089 0.9023 -0.0033 -0.36% 18:58:04 USD/CAD 1.3182 1.3191 1.3195 1.3169 -0.0005 -0.04% 18:58:03 + NZD/USD 0.6625 0.6603 0.6630 0.6602 +0.0021 +0.32% 18:58:05 + EUR/JPY 123.55 123.54 123.64 123.36 +0.02 +0.02% 18:58:04 + GBP/JPY 136.74 136.17 136.86 135.93 +0.54 +0.40% 18:58:03 Australia 3 Year Government Bond QUOTES & COMPANIES TMBMKAU-03Y (Tullett Prebon) VIEW ALL COMPANIES 1 D 5 D 1M 3M YTD 14 3Y YIELD 4:30 PM AEDT 10/19/20 1 Day Range 0.133 - 0.143 YIELD 0.141% 52 Week Range (Yield) 0.129 - 0.936 (10/07/20 - 12/31/19) 0.15% 0.006 ruhn 0.14% PRICE Coupon 5.500% 113.358 -0.029 (-0.03%) 0.13% Maturity 04/21/23 Oct 13 Oct 14 Oct 15 Oct 16 Oct 19 Open 0.134 Prior Close (Yield) 0.140 1 Day Price Chg TMBMKAU-03Y -0.03% Japan 10 Year -0.03% U.S. 10 Year -0.06% Germany 10 Year 0.05% A DATE OPEN HIGH LOW CLOSE 10/19/20 0.134 0.143 0.133 0.140 10/16/20 0.147 0.147 0.134 0.134 10/15/20 0.153 0.160 0.130 0.147 10/14/20 0.149 0.156 0.147 0.153 10/13/20 0.149 0.152 0.141 0.149 10/12/20 0.149 0.154 0.145 0.149 10/09/20 0.150 0.155 0.141 0.149 10/08/20 0.144 0.163 0.138 0.150 10/07/20 0.173 0.173 0.129 0.144 10/06/20 0.181 0.193 0.171 0.173 10/02/20 0.191 0.191 0.170 0.178 10/01/20 0.170 0.198 0.170 0.191 09/30/20 0.167 0.183 0.167 0.170 09/29/20 0.163 0.172 0.161 0.167 09/28/20 0.175 0.175 0.162 0.163 09/25/20 0.175 0.187 0.167 0.175 09/24/20 0.181 0.193 0.174 0.175 09/23/20 0.217 0.227 0.168 0.181 09/22120 0.236 0.243 0.217 0.217 09/21/20 0.241 0.241 0.233 0.236 QUOTES & COMPANIES Q Australia 1 Year Government Bond TMBMKAU-01Y (Tullett Prebon) VIEW ALL COMPANIES 1D 5D 1M 3M YTD 1 Y 3Y 4:30 PM AEDT 10/19/20 YIELD 1 Day Range 0.104 - 0.110 YIELD 0.106% 52 Week Range (Yield) 0.101 - 0.948 (10/07/20 - 01/02/20) 0.110% -0.004 Marina 0.105% PRICE Coupon 2.000% 102.208 -0.001 (0.00%) 0.100% Maturity 12/21/21 Oct 13 Oct 14 Oct 15 Oct 16 Oct 19 Open 0.110 Prior Close (Yield) 0.106 1 Day Price Chg TMBMKAU-01Y 0.00% Japan 10 Year -0.04% U.S. 10 Year -0.07% Germany 10 Year 0.05% DATE OPEN HIGH LOW CLOSE 10/19/20 0.110 0.110 0.104 0.106 10/16/20 0.111 0.111 0.105 0.110 10/15/20 0.108 0.116 0.105 0.111 10/14/20 0.110 0.113 0.108 0.108 10/13/20 0.109 0.113 0.107 0.110 10/12/20 0.112 0.112 0.106 0.109 10/09/20 0.114 0.116 0.109 0.112 10/08/20 0.109 0.126 0.102 0.114 10/07/20 0.122 0.122 0.101 0.109 10/06/20 0.119 0.130 0.117 0.122 10/02/20 0.126 0.126 0.115 0.121 10/01/20 0.120 0.135 0.120 0.126 09/30/20 0.121 0.128 0.119 0.120 09/29/20 0.122 0.124 0.117 0.121 09/28/20 0.116 0.144 0.116 0.122 09/25/20 0.116 0.127 0.114 0.116 09/24/20 0.140 0.140 0.116 0.116 09/23/20 0.150 0.158 0.139 0.140 09/22/20 0.160 0.163 0.149 0.150 09/21/20 0.161 0.162 0.155 0.160 Table 1: Foreign currency Forecasts: Source NAB September 28, 2020 Exchange rate forecast Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Majors AUD/USD 0.74 0.76 0.77 0.77 0.78 0.79 0.80 0.80 NZD/USD 0.66 0.67 0.68 0.69 0.70 0.70 0.72 0.72 USD/JPY 103 103 100 100 100 99 98 98 EUR/USD 1.22 1.23 1.25 1.26 1.27 1.28 1.30 1.31 GBP/USD 1.36 1.40 1.40 1.43 1.44 1.45 1.47 1.48 USD/CHF 0.91 0.91 0.91 0.91 0.91 0.92 0.91 0.91 USD/CAD 1.32 1.29 1.28 1.28 1.27 1.26 1.25 1.25 USD/CNY 6.70 6.60 6.55 6.50 6.45 6.40 6.35 6.30 Australian Cross Rates AUD/NZD 1.13 1.13 1.13 1.12 1.11 1.12 1.11 1.11 AUD/JPY 76 78 77 77 78 78 78 78 AUD/EUR 0.61 0.61 0.62 0.61 0.62 0.62 0.61 0.61 AUD/GBP 0.54 0.54 0.55 0.54 0.54 0.54 0.54 0.54 AUD/CHF 0.67 0.69 0.70 0.71 0.71 0.72 0.73 0.73 AUD/CAD 0.97 0.98 0.99 0.99 0.99 0.99 1.00 1.00 AUD/CNY 4.96 4.99 5.04 5.03 5.05 5.04 5.06 5.04 Effective 28 September 2020