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Suppose that the current spot exchange rate between the Singapore dollar (SGD) and the Australian dollar (AUD) is 0.9701
Posted: Thu May 05, 2022 8:33 am
by answerhappygod
- Suppose That The Current Spot Exchange Rate Between The Singapore Dollar Sgd And The Australian Dollar Aud Is 0 9701 1 (34.09 KiB) Viewed 26 times
Suppose that the current spot exchange rate between the Singapore dollar (SGD) and the Australian dollar (AUD) is 0.9701 AUD/SGD. And, the 1-year interest rate in Singapore and Australia are 0.96% and 2.00%, respectively. (2A) Find the 1-year forward exchange rate for AUD/SGD assuming that interest rate parity holds. (Show all your workings to receive full credit. Write down your answer accurate to 4 decimal places.) [8 marks] (2B) Assume that the forward exchange rate you had calculated in part (a) is an unbiased predictor of future exchange rates. Explain how you could execute a covered interest arbitrage trade. [8 marks] (2C) State four differences between futures contracts and forward contracts. [8 marks]