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

how to account cst collected

In additional information depreciation of two years is given. What is the treatment of it while preparing fixed assets account.

Options with discontinuous payoffs are called Binary options. An example is the cash-or-nothing callwhich pays nothing if the stock price at the maturity of the option is below the

Receiver necessary statement The receiver may, if necessary, require the statement to be submitted by: Past or present officers of the company Persons who have taken

What is the function of balance sheet

Calculate the Net Present Value of the Investment XYZ Ltd is a manufacturer of household goods located in Ang Mo Ko. They presently make and wholesale fruit juicers, blenders

Data for 2013 were as follows: PBO, January 1, $244,000 and December 31, $274,000; pension plan assets (fair value) January 1, $190,000, and December 31, $233,000. The projected be

Assets                                                       2011                                                                        2010 Non Current Assets

Q. Explain about Credit-worthiness? There are a numerous ways in which Fenton Security plc could ensure that customers are subjected to tighter credit appraisal checks before g