Assume the Following Information

question 42

Multiple Choice

Assume the following information:
Current spot rate of Australian dollar = $.64
Forecasted spot rate of Australian dollar 1 year from now = $.59
1-year forward rate of Australian dollar = $.62
Annual interest rate for Australian dollar deposit = 9%
Annual interest rate in the U.S.= 6%
Given the information in this question,the return from covered interest arbitrage by U.S.investors with $500,000 to invest is _______%.

• A) about 6.00
• B) about 9.00
• C) about 7.33
• D) about 8.14
• E) about 5.59

Analyze the impact of different annual rates of return on an investment.

Understand and calculate the effective annual rate (EAR) from nominal and compounded interest rates.

Calculate the required rate of return for future investments based on initial contributions and final goals.

Understand the process of converting between different compounding intervals.

---

Definitions:

Value-Free Sociology

A principle stating that sociology should strive to be objective, unbiased, and non-judgmental in its research and findings, separating personal values from scientific analysis.

Objective

Something that one's efforts or actions are intended to attain or accomplish; purpose or goal.

Social Interactionist

focuses on understanding society through the study of how individuals interact and interpret their social world.

Applied Sociological Thinking

The use of sociological theories and methods to solve real-world problems and make informed decisions in everyday life.