Discuss the implications of the interest rate parity for the exchange rate determinants: Financial Management Coursework, UOB, UK

Questions: 

1. Discuss the implications of the interest rate parity for the exchange rate determinants.

2. You are invited to a seminar and asked to present briefly about ”arbitrage”. Provide an explanation with some examples in the foreign exchange
market.

3. While you were visiting London, you purchased a Jaguar for £35,000, payable in three months. You have enough cash at your bank in New York City, which pays 0.35% interest per month, compounding monthly, to pay for the car. Currently, the spot exchange rate is $1.45/£ and the three-month forward exchange rate is $1.40/£. In London, the money market interest rate is 2.0% for a three-month investment. There are two alternative ways of paying for your Jaguar.

a. Keep the funds at your bank in the U.S. and buy £35,000 forward.
b. Buy a certain pound amount spot today and invest the amount in the U.K. for three months so that the maturity value becomes equal to £35,000 Evaluate each payment method. Which method would you prefer? Why?

Do You Need Assignment of This Question

Order Non Plagiarized Assignment

The post Discuss the implications of the interest rate parity for the exchange rate determinants: Financial Management Coursework, UOB, UK appeared first on Students Assignment Help UK.

Discuss the implications of the interest rate parity for the exchange rate determinants: Financial Management Coursework, UOB, UK
Scroll to top