Discuss the interest rate parity, Financial Accounting

Below is information about the spot and forward rates for three currencies against the US dollar (USD):

Currency (exchange rate) Spot Rate Six-month forward rate

Euro (EUR)                                                      (EUR/USD)                                                0.84 0.81

Japanese Yen (JPY)                                         (JPY/USD)                                                 122.10 118.80

British Pound (GBP)                                         (USD/GBP)                                                1.47 1.49

(a) Critically discuss the interest rate parity and covered interest arbitrage theories.

(b) Discuss the conditions for interest rate parity theory to hold.

(c) Use the spot exchange rates to check if interest rate parity holds or not, given the following sixmonth interest rates:

United States          5.60 per cent

Euro area                3.40 per cent

Japan                    1.00 per cent

Britain                   5.25 per cent

 

Posted Date: 3/28/2013 5:21:45 AM | Location : United States







Related Discussions:- Discuss the interest rate parity, Assignment Help, Ask Question on Discuss the interest rate parity, Get Answer, Expert's Help, Discuss the interest rate parity Discussions

Write discussion on Discuss the interest rate parity
Your posts are moderated
Related Questions
Internal Rate of Return

Staples INC has operating leases. Assuming a discount rate of 9%, adjust the current balance sheet for the presences of these leases. Which reported expenses would change if these

Q. Explain about Spring and Forward loading? Spring loading - Timing of option grants to occur before good news or after bad news is released Concerns about insider trading

Q. Show the Expatriation Tax? Expatriation Tax - Individuals who loose or terminate their residency within 10 year period immediately preceding the close of a tax year, if term

economic substance as in recognition of revenue

Pooling of Interest - Used to account for acquisition of another company when acquiring company exchanges its voting COMMON STOCK for voting common stock of the attained company wh

History of trust The following general information should be kept with the trust documents: Summary of will or trust deed; Short history of the trust; Trustees’ nam

Third Inc. wishes to issue a perpetual callable bond. The current interest rate is 6%. Next year, there is a 30% chance that the interest rate will be 4.5% and a 70% chance that th

Given the information that follows, draw a cash budget for the XYZ Store for the first six months of 2012. Every prices and costs remain constant. Sales are 80% for credit

INVESTMENT OF FUNDS TO PROVIDE FOR LEGACIES AND INTEREST ON LEGACIES (a) Where a general legacy is given for life, the sum bequeathed shall, at or before the end of a year afte