Suppose the current exchange rate for the polish zloty is Z2.78. The expected
exchange rate in three years is Z2.86. What is the difference in the annual inflation
rates for the U.S. and Poland over this period?

Problem 31-11 The International Fisher Effect.

Problem 31-12 Spot vs Forward rates
Suppose the spot and three-month forward rates for the yen are Y
79.35 and
Y
78.76, respectively. What would you estimate is the difference between the
annual inflation rates of the U.S. and japan?

MC algo 31-19 Covered Interest Arbitrage
The spot rate between the U.K. and the U.S. is £.7624/$, while the one-year forward rate is
£.7542/$. The risk-free rate in the U.K. is 4.63 percent and risk-free rate in the United States
is 2.76 percent. How much in profit can you earn on $12,000 utilizing covered interest

MC algo 31-20 Interest Rate Parity

The one-year forward rate for the Swiss franc is SF1.1665/$. The spot rate is SF1.1776/$. The
interest rate on a risk-free asset in Switzerland is 3.11 percent. If interest rate parity exists,
what is the one-year risk-free rate in the U.S.?

MC algo 31-21 Interest Rate Parity
The spot rate between the Japanese yen and the U.S. dollar is ¥107.87/$, while the one-year
forward rate is ¥108.42/$. The one-year risk-free rate in the U.S. is 2.79 percent. If interest
rate parity exists, what is the one-year risk-free rate in Japan?

MC algo 31-22 Interest Rate Parity
Assume interest rate parity holds. The one-year risk-free rate in the U.S. is 3.06 percent and
the one-year risk-free rate in Japan is 3.45 percent. The spot rate between the Japanese yen
and the U.S. dollar is ¥111.81/$. What is the one-year forward exchange rate?
F

MC algo 31-22 Interest Rate Parity
The one-year risk-free rate in the U.S. is 2.64 percent and the one-year risk-free rate in
Mexico is 4.44 percent. The one-year forward rate between the Mexican peso and U.S. dollar
is MXN12.24/$. What is the spot exchange rate? Assume interest rate parity holds.