Suppose That The Two-year Interest In Australia And The United States Are 3% And 2% Respectively, And The Spot Exchange Rate Is 0.75 USD Per AUD. What Is The Fair Value Of The Two-year Forward Exchange Rate? Suppose That The Two-year Forward Exchange Rate
Suppose that the two-year interest in Australia and the UnitedStates are 3% and 2% respectively, and the spot exchange rate is0.75 USD per AUD.
- What is the fair value of the two-year forward exchangerate?
- Suppose that the two-year forward exchange rate is 0.70.Demonstrate the presence of an arbitrage opportunity and calculateits profit.
