Today, the annual interest rate on bank deposits is 8.15% in New York and 3% in Paris, the spot exchange rate is 1.2 US dollars per euro, and the one-year forward exchange rate is 1.236 US dollars per euro. Emily plans to deposit 1,000 US dollars in either New York or Paris for one year. Answer the following questions, using the exact equations for the UIP/CIP.(a). Where should Emily deposit her funds? Given today's spot exchange rate and interest rates, what is the equilibrium forward rate, if covered interest parity (CIP) holds? Report the intermediate steps. [3 marks](b). Suppose the forward rate takes the value given by your answer to question (a). If UIP also holds, is the US dollar expected to appreciate or depreciate against the euro over one year? By how much? Report the intermediate steps.  [3 marks]

Consider a Dutch investor with 1,000 euros to place in a bank deposit in either the Netherlands (home country) or Great Britain (foreign country). The (one-year) interest rate on bank deposits is 2.00% in Britain and 4.04% in the Netherlands. The (one-year) forward euro–pound exchange rate is 1.575 euros per pound and the spot rate is 1.5 euros per pound. Answer the following questions, using the exact equations for UIP and CIP as necessary. b. What is the (riskless) euro-denominated return on British deposits for this investor using forward cover? c. Is there an arbitrage opportunity here? Explain why or why not. Is this an equilibrium in the forward exchange rate market? d. If the spot rate and interest rates are as stated previously, what should be the equilibrium forward rate, according to CIP? e. Suppose the forward rate takes the value given by your answer to (d). Calculate the forward premium on the British pound for the Dutch investor (where exchange rates are in euros per pound). Is it positive or negative? Why do investors require this premium/discount in equilibrium? f. If UIP holds, what is the expected depreciation of the euro against the pound over one year? g. Based on your answer to (f), what is the expected euro–pound exchange rate one year ahead?

Suppose that the one-year interest rate is 3.0 percent in Italy. The spot exchange rate is $1.20/€, and the one-year forward exchange rate is $1.18/€. What must the one-year interest rate be in the United States to avoid arbitrage opportunities?Group of answer choices1.0128%1.2833%4.75%none of the options

Suppose that the one-year interest rate is 5.0 percent in the United States. The spot exchange rate is $1.20/€, and the one-year forward exchange rate is $1.16/€. What must the one-year interest rate be in the euro zone to avoid arbitrage opportunities?Group of answer choices5.0%6.09%none of the options8.62%

Suppose that the annual interest rate is 2.0 percent in the United States and 4 percent in Germany, that the spot exchange rate is $1.60/€ and that the forward exchange rate, with one-year maturity, is $1.50/€. Assume that an arbitrager can borrow up to $1,000,000 or €625,000. If an astute trader finds an arbitrage, what is the net cash flow in one year?

Suppose you observe a spot exchange rate of $2.00/£. If interest rates are 5 percent per annum in the U.S. and 2 percent per annum in the U.K., what is the no-arbitrage one-year forward rate?Group of answer choices£1.9429/$$1.9429/££2.0588/$$2.0588/£