A) Assume the spot exchange rate for the Hungarian forint is HUF221. Also assume the inflation rate in the United States is1.6 percent per year while it is 3.5 percent in Hungary. What is the expected exchange rate 3 years from now?
B) Assume the direct quote on the euro is 1.23 and the indirect quote on the Swiss franc is .88. What is the cross rate in terms of Swiss francs?
C) Suppose the spot exchange rates are ¥102= $1 and €1= $1.57. Also suppose the cross rate is ¥159= €1. What is the arbitrage profit per one U.S dollar?
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