Three Exchange Rates are as follows: 1) US Dollars (USD) to Japanese Yens (JYP) at JPY 95 to USD 1
2) JPY to Euros (EUR) at JPY 122 to EUR 1

3) EUR to USD at EUR 0.72 to USD 1

Suppose you start with USD 100,000, and do one round of “triangular arbitrage”, that is convert make a total of 3 foreign exchange transactions to start from USD and return to USD. What will be your profit in USD?

(Note: Profit will be Final USD amount – $100,000. There are not transaction costs.)

 

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The Spot Rate (S0) for USD to Australian Dollars (AUD) is USD 0.87 to AUD 1.
The riskless rate of interest in the US for 3 months (RUS) is 0.2%. The riskness rate in Australia (Foreign Country) is 1.4%.

According to the Covered Interest Rate Parity relationship, what should be the 3-month Forward rate (F) of USD to AUD? (Note: Your answer should be the number of USD for AUD 1 in the 3-month Forward rate for USD to AUD.)

 

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