Suppose the Eurosterling rate is 15 percent, and the Eurodollar rate is 11.5 percent. What is the forward premium on thedollar? Explain.

The Wall Street Journal reported the following spot and forward rates for the Swiss franc ($/SF).

a. Was the Swiss franc selling at a discount or premium in the forward market?

b. What was the 30-day forward premium (or discount)? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

c. What was the 90-day forward premium (or discount)? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

d. Suppose you executed a 90-day forward contract to exchange 130,000 Swiss francs into U.S. dollars. How many dollars would you get 90 days hence?

e. Assume a Swiss bank entered into a 180-day forward contract with Bankers Trust to buy $130,000. How many francs will the Swiss bank deliver in six months to get the U.S. dollars? (Round your answer to 2 decimal places.)

Suppose the spot exchange rate for the Hungarian forint is HUF 221.53. The current one-year U.S. interest rate is 4.9 percent and the current Hungarian one-year interest rate is 8.6 percent. a. What is the one-year forward rate? b. If the two year U.S. and Hungarian interest rates are the same, what is the two-year forward rate?

Assume that the current euro-dollar exchange rate (E$/€) is $1.10 per euro. Further suppose that the dollar interest rate (R$) is 10 percent and the euro interest rate (R€) is 5 percent. You expect that the exchange rate (Ee$/€) would be $1.165 per euro in a year and that you have $1,000,000 to invest in either a dollar or a euro denominated asset. Calculate the dollar rate of return of either asset. Which of these deposits offer the higher dollar rate of return and why? We have a number of assumptions including that 1. We assume perfect capital mobility meaning that investors can invest in either dollar-denominated assets or euro-denominated assets. 2. International investments and capital flow are free of costs. 3. We further assume that taxes are uniform across countries. The dollar-denominated asset (for example, the U.S. government security) offers 10% rate of return . What will be the expected dollar return on euro-denominated asset?