1. The forward Indian Rupee (Rps), relative to $, given spot rate of Rps 48.50 and a 3 month forward rate of Rps 50.00 is closest to (annualized): a) 12 % premium (approx.) b) 12.37% discount c) 12.37% premium d) 12% discount (approx.) e) 2.91% discount
2. The bid-ask spot rate is quoted as Real 1.8400 -1.8550 per dollar. I want to exchange $500 for real. How many reals will I get?
a) 271.74 b) 920 c) 927.50 d) 269.54
3. Based on Interest Rate Parity in pesos per dollar terms, larger the difference with which peso interest rate exceeds the dollar interest rate, the: a) larger will be the forward discount on the peso b) larger will be the forward premium on the peso c) smaller will be the forward premium on the peso d) smaller will be the forward discount on the peso .
4. Interest Rate Parity: The spot rate on the Brazilian real is quoted at $0.5555 and the six month forward rate at $0.5955. Is the real at a forward premium or discount and how much per annum?
5. In the above problem, is the dollar at a premium or discount and how much per annum?
6. Assume that the annualized interest rates are 3% in U.S. and 8% in Brazil. Is arbitrage profit possible under covered Interest Rate Parity? Why?
7. If the two interest rates are as shown in problem 6 and the spot rate is $0.5555 per real as shown in problem 5, what should be the six-month forward rate so that there is no arbitrage profit possible?
8. Non-deliverable forwards: The spot rate for Argentina peso is P2.75/$ and the six-month forward rate is P2.90 /$. The actual rate settles six months later at P2.85/$. If you entered a six month non-deliverable forward contract today to buy P29 million, what is your gain or loss 6 months later?