Use the information below to answer the following

jagguarpaw January 16, 2017 0 Comments

Question: Use the information below to answer the following…

Use the information below to answer the following questions.

Currency per U.S. $ Australia dollar 1.2385

6-months forward 1.2348

Japan yen 100.4100

6-months forward 99.9700

U.K. pound .6793

6-months forward .6780

Suppose interest rate parity holds, and the current risk-free rate in the United States is 5 percent per six months.

Use the approximate interest rate parity condition to answer this question.

  1. What must the six-month risk-free rate be in Australia?
  2. What must the six-month risk-free rate be in Japan?
  3. What must the six-month risk-free rate be in Great Britain?