Forward Premium on the Dollar. Calculate the forward premium on the dollar if the spot rate is euro 1.3444 equals $ 1.00 and the 6-month forward rate is euro 1.3582 equals $ 1.00. Note: Use a 360-day year. The forward premium on the dollar is _______%
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Assume that annual interest rates in the United States are 4 percent, while interest rates in France are 6 percent. a. According to IRP, what should the forward rate premium or discount of the euro be? b. If the euro's spot rate is $$\$ 1.10$$, what should the oneyear forward rate of the euro be?
At present, the dollar is trading against the British pound at spot GBP/USD = 1.1517, and at one-year (365-day) forward at 64 forward points. One-year (360-day) eurodollar deposits for the U.S. dollar is 5.39%, while half-year (180-day) eurosterling is 4.11%. Using the covered interest parity condition, determine if: (a) there is an arbitrage opportunity (hint: be sure to pay attention to the difference between the tenor of the forward versus that of deposits); (b) explain how you may exploit this opportunity, if any?
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Using the information below, calculate the expected dollar return on euro deposits if the expected (forward) exchange rate is $1.16 per euro. Today's Dollar/Euro Exchange Rate Interest Rate on Euro Deposits Expected Dollar Returns on Euro Deposits (interest rate on euro deposits plus expected dollar depreciation against euro) 1.16 0.03 1.14 0.03 1.12 0.03 1.10 0.03 1.08 0.03
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