Q6. The domestic interest rate is 8% and the foreign interest rate is 6%. If the spot rate is 4 domestic units/foreign unit, what should the forward exchange rate be for interest rate parity to hold? A) 3.930. B) 4.250. C) 4.075.
Q7. The domestic interest rate is 7% and the foreign interest rate is 9%. If the forward exchange rate is 5 domestic units per foreign unit, what spot exchange rate is consistent with interest rate parity (IRP)? A) 4.91. B) 5.72. C) 5.09.
Q8. The domestic interest rate is 9% and the foreign interest rate is 7%. If the forward exchange rate is 5 domestic units per foreign unit, what spot exchange rate is consistent with interest rate parity? A) 4.91. B) 4.83. C) 5.09.
Q9. One-year interest rates are 7.5% in the U.S. and 6.0% in New Zealand. The current spot exchange rate is $0.55/NZD. If interest rate parity holds, today’s one-year forward rate ($/NZD) must be: A) $0.54233/NZD. B) $0.55778/NZD. C) $0.56675/NZD.
Q10. The domestic interest rate is 9% and the foreign interest rate is 7%. If the forward rate is 5 domestic units per foreign unit, what should the spot exchange rate be for interest rate parity to hold? A) 4.83. B) 4.91. C) 5.09.
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