Question: There are two finance problems below: On 3 October 2018, the euro dollar FX rate was trading at 1 euro = $1.3772, and the six-month

There are two finance problems below:

On 3 October 2018, the euro dollar FX rate was trading at 1 euro = $1.3772, and the six-month forward price for a 3 April 2019 forward contract on the Euro was $1.3891. Assuming six-month euro interest rates were 1.415%, what is the implied current six-month dollar interest rate? Both interest rates are quoted with act/360 daycount and semi-annual compounding. There are 182 days between 3 Oct 2008 and 3 Apr 2009.

A house in Westchester is offered for sale at $1,000,000. Interest-only mortgages (you borrow money and simply pay the interest each year, no repayment of principal) are 4% (annual compounding), and the house can be rented out for $5,000 per month. Real estate taxes to be paid by the owner are $10,000 per annum. Find an upper bound for the one-year forward price for the house. Assume any other interest rates you need are positive. State any assumptions made.

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