Suppose your company imports computer motherboards from Singapore. The exchange rate is currently 1.5803S$/US$

Suppose your company imports computer motherboards from Singapore. The exchange rate is currently 1.5803S$/US$. You have just placed an order for 30,000 motherboards at a cost to you of 170.90 Singapore dollars each. You will pay for the shipment when it arrives in 120 days. You can sell the motherboards for $148 each. What will your profit be if the exchange rate goes up by 8 percent over the next 120 days?    A.  $913,564 B.  $1,008,121 C.  $1,216,407 D.  $1,435,999 E.  $1,502,400 Profit = 30,000 {$148 - [(S$170.90) ($1/(S$1.5803 × 1.08))]} = $1,435,999

90.

Suppose the spot and six-month forward rates on the Norwegian krone are Kr6.36 and Kr6.56, respectively. The annual risk-free rate in the United States is 4.5 percent, and the annual risk-free rate in Norway is 7 percent. What would the six-month forward rate have to be on the Norwegian krone to prevent arbitrage?    A.  Kr6.4390 B.  Kr6.4872 C.  Kr6.5103 D.  Kr6.5174 E.  Kr6.6067 F180 = (Kr6.36)[1 + (0.07 - 0.045)]1/2 = Kr6.4390

91.

You observe that the inflation rate in the United States is 3.5 percent per year and that T-bills currently yield 3.8 percent annually. What do you estimate the inflation rate to be in Australia, if short-term Australian government securities yield 4.5 percent per year?    A.  4.17 percent B.  4.20 percent C.  4.24 percent D.  4.27 percent E.  4.30 percent RUS - hUs = RFC - hFC 0.038 - 0.035 = 0.045 - hFC; hFC = 4.20 percent

92.

Suppose the spot and three-month forward rates for the yen are ¥128.79 and ¥135.22, respectively. What is the approximate annual percent difference between the inflation rate in the U.S. and in Japan?    A.  3.93 percent B.  4.21 percent C.  16.67 percent D.  21.52 percent E.  22.28 percent hUS - hJAP ≈ (¥135.22 - ¥128.79)/¥128.79 = 0.049926 Approximate inflation difference = (1 + 0.049926)4 - 1 = 21.52 percent