**Question 246** foreign exchange rate, forward foreign exchange rate, cross currency interest rate parity

Suppose the Australian cash rate is expected to be **8.15**% pa and the US federal funds rate is expected to be **3.00**% pa over the next **2** years, both given as nominal effective annual rates. The current exchange rate is at parity, so **1** USD = **1** AUD.

What is the implied **2** year forward foreign exchange rate?

The Australian cash rate is expected to be **6**% pa while the US federal funds rate is expected to be **4**% pa over the next 3 years, both given as effective annual rates. The current exchange rate is **0.80** AUD per USD.

What is the implied **3** year forward foreign exchange rate?

**Question 626** cross currency interest rate parity, foreign exchange rate, forward foreign exchange rate

The Australian cash rate is expected to be **2**% pa over the next one year, while the Japanese cash rate is expected to be **0**% pa, both given as nominal effective annual rates. The current exchange rate is **100** JPY per AUD.

What is the implied **1** year forward foreign exchange rate?

**Question 667** forward foreign exchange rate, foreign exchange rate, cross currency interest rate parity, no explanation

The Australian cash rate is expected to be **2**% pa over the next one year, while the US cash rate is expected to be **0**% pa, both given as nominal effective annual rates. The current exchange rate is **0.73** USD per AUD.

What is the implied 1 year USD per AUD forward foreign exchange rate?

**Question 876** foreign exchange rate, forward foreign exchange rate, cross currency interest rate parity

Suppose the yield curve in the USA and Germany is flat and the:

- USD federal funds rate at the Federal Reserve is
**1**% pa; - EUR deposit facility at the European Central Bank is
**-0.4**% pa (note the negative sign); - Spot EUR exchange rate is
**1**USD per EUR; - One year forward EUR exchange rate is
**1.011**USD per EUR.

You suspect that there’s an arbitrage opportunity. Which one of the following statements about the potential arbitrage opportunity is **NOT** correct?