4/6 Class

Question 1

domestic CIA

Answer 1

1/S (1+r) * F - (1-r)

Question 2

foreign CIA

Answer 2

S * (1+r) * 1/F - (1+r*)

F= forward rate

Question 3

formula

Answer 3

(1+R)/(1+r*)

Question 4

IRP

Answer 4

the difference of the interest rates in countries should offset arbitrage opportunities