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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This question is a continuation of the “Contagious Speculation and
a Cure for Cancer: A Nonevent that Made Stock Prices Soar” from your Practice Problems for this session. So read that first if you do not remember, and then continue.
After the NYT publication on Sunday, May 3, 1998, the EntreMed stock price rose from $ 12.063 at the market close on May 1, 1998 to $85 at the market opening on May 4, 1998.
Question: According to one form of Market Efficiency, the stock price should not have reacted to the May 3, 1998 publication, because it did not contain any new information.
What form of market efficiency this stock rise violate?

The answer should be the most encompassing form of violation.
Question 6 options:

A) Market efficiency is not violated.

B) Weak form.

C) Semistrong form.

D) Strong form.

 

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