Reading 18: Currency Exchange Rates - LOS h, (Part 1) ～ Q domestic, exchange, interest, foreign, forward

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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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