You are required to answer the questions below and explain your calculations, using, as appropriate, numbers,...
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You are required to answer the questions below and explain your calculations, using, as appropriate, numbers, words and diagrams. References are not expected or required to answer these questions. Question 1 A trader, who is considering uncovered intertst arbitrage between the US dollar (USD) and Australian dollar (AUD), faces the following data: Funds available: 2 million USD Spot exchange rate: 0.94 AUD per USD Spot exchange rate one year ago: 1.00 AUD per USD USD 3-month interest rate: 0.12% per annum AUD 3-month interest rate: 4.69% per annum Required (1) Calculate the profit that would be made if the exchange rate remains at its current level in three months' time; (2) How would the profit figure change if the Australian dollar continues to strengthen at the same rate as it has done over the previous year? You are required to answer the questions below and explain your calculations, using, as appropriate, numbers, words and diagrams. References are not expected or required to answer these questions. Question 1 A trader, who is considering uncovered intertst arbitrage between the US dollar (USD) and Australian dollar (AUD), faces the following data: Funds available: 2 million USD Spot exchange rate: 0.94 AUD per USD Spot exchange rate one year ago: 1.00 AUD per USD USD 3-month interest rate: 0.12% per annum AUD 3-month interest rate: 4.69% per annum Required (1) Calculate the profit that would be made if the exchange rate remains at its current level in three months' time; (2) How would the profit figure change if the Australian dollar continues to strengthen at the same rate as it has done over the previous year?
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Answer 1 USD for 3 months 2000000 USD to repay after 3 months 20000001012312 USD 200600 convert ... View the full answer
Related Book For
Database Systems A Practical Approach to Design Implementation and Management
ISBN: 978-0132943260
6th Edition Global
Authors: Thomas Connolly, Carolyn Begg
Posted Date:
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