FIN4802: INTERNATIONAL FAINACIAL MANAGEMENT
ASSIGNMENT 01 2023
Due Date: 25 May 2023
Unique Number: 303479
QUESTION 1
1.1.
For one year, iCHF = 3.75% and iUS$ = 1.25%.
The spot exchange rate is US$1.2051/CHF, and the forward rate is US$1.1922/CHF.
Thus, (1+ iUS$) = 1.0125
and
(F/S) (1 + iCHF) = (1.1922/1.2051) (1.0375) = 1.0264.
Because the left and right sides of IRP are not equal, IRP does not hold.
Or alternatively:
(1+ iCHF) = 1.0375
and
(F/S) (1 + iUS$) = (0.8388/0.8298) (1.0125) = 1.0235
Because the left and right sides of IRP are not equal, IRP does not hold.
ASSIGNMENT 01 2023
Due Date: 25 May 2023
Unique Number: 303479
QUESTION 1
1.1.
For one year, iCHF = 3.75% and iUS$ = 1.25%.
The spot exchange rate is US$1.2051/CHF, and the forward rate is US$1.1922/CHF.
Thus, (1+ iUS$) = 1.0125
and
(F/S) (1 + iCHF) = (1.1922/1.2051) (1.0375) = 1.0264.
Because the left and right sides of IRP are not equal, IRP does not hold.
Or alternatively:
(1+ iCHF) = 1.0375
and
(F/S) (1 + iUS$) = (0.8388/0.8298) (1.0125) = 1.0235
Because the left and right sides of IRP are not equal, IRP does not hold.
