Define arbitrage and describe what the one-year forward rate must be to prevent arbitrage. Arbitrage is buying and selling of securities, currency or items in different platforms simultaneously or in a derivative form by taking advantage of the low prices of the commodities at that point in the market.

Greg Hwang
Abraham Lincoln University
FIN-444
4/26/18

1. Select the Australian Dollar link and respond:
Is the U.S. dollar expected to appreciate or depreciate compared to the Australian dollar over the next six months?
The U.S dollar is likely to appreciate compared to the Australian dollar over the coming six months. This is because it’s value is predicted to be less than initial 0.7759 (Financial Forecast Centre, 2018)
Give your conclusions from the data
The value of the United States dollar was at 0.7759 it is reduced to 0.697 by the end of the six months when compared to the Australian dollar.
2. Next, find the current exchange rate between the U.S. dollar and the Euro. Then find the U.S. dollar LIBOR and the Euro LIBOR interest rates.
The exchange rate between the U.S dollar and Euro
I Euro=1.22 dollars
The U.S LIBOR interest is the average amount if interbank interest rate that banks in the London Market need for lending unsecured loans in United States currency.
The U.S LIBOR interest rates
USD 04-24-2018 04-23-2018 04-20-2018 04-19-2018 04-18-2018
USD LIBOR – overnight
1.70313 % 1.70313 % 1.70313 % 1.70313 % 1.70500 %
USD LIBOR – 1 week
1.74250 % 1.74375 % 1.74250 % 1.74250 % 1.74250 %
USD LIBOR – 2 weeks
– – – – –
USD LIBOR – 1 month
1.89826 % 1.89711 % 1.89695 % 1.89826 % 1.89707 %
USD LIBOR – 2 months
2.06063 % 2.05938 % 2.05813 % 2.05625 % 2.04625 %
USD LIBOR – 3 months
2.36167 % 2.35954 % 2.35923 % 2.36156 % 2.35866 %
USD LIBOR – 4 months
– – – – –
USD LIBOR – 5 months
– – – – –
USD LIBOR – 6 months
2.51625 % 2.51563 % 2.51125 % 2.50938 % 2.50313 %
USD LIBOR – 7 months
– – – – –
USD LIBOR – 8 months
– – – – –
USD LIBOR – 9 months
– – – – –
USD LIBOR – 10 months
– – – – –
USD LIBOR – 11 months
– – – – –
USD LIBOR – 12 months
2.76875 % 2.76875 % 2.76031 % 2.75844 % 2.74750 %

Source google
The Euro LIBOR interest rates

EUR 04-24-2018 04-23-2018 04-20-2018 04-19-2018 04-18-2018
Euro LIBOR – overnight
-0.44114 % -0.44114 % -0.44186 % -0.44043 % -0.44114 %
Euro LIBOR – 1 week
-0.42171 % -0.42200 % -0.42200 % -0.42200 % -0.42200 %
Euro LIBOR – 2 weeks
– – – – –
Euro LIBOR – 1 month
-0.40229 % -0.40157 % -0.40157 % -0.40157 % -0.40157 %
Euro LIBOR – 2 months
-0.38414 % -0.38343 % -0.38343 % -0.38271 % -0.38271 %
Euro LIBOR – 3 months
-0.36500 % -0.36500 % -0.36500 % -0.36500 % -0.36500 %
Euro LIBOR – 4 months
– – – – –
Euro LIBOR – 5 months
– – – – –
Euro LIBOR – 6 months
-0.32114 % -0.32114 % -0.32157 % -0.32371 % -0.32371 %
Euro LIBOR – 7 months
– – – – –
Euro LIBOR – 8 months
– – – – –
Euro LIBOR – 9 months
– – – – –
Euro LIBOR – 10 months
– – – – –
Euro LIBOR – 11 months
– – – – –
Euro LIBOR – 12 months
-0.24414 % -0.24414 % -0.24486 % -0.24629 % -0.24629 %
Source Google
Define arbitrage and describe what the one-year forward rate must be to prevent arbitrage.
Arbitrage is buying and selling of securities, currency or items in different platforms simultaneously or in a derivative form by taking advantage of the low prices of the commodities at that point in the market.
Interest rates impact the prices of the commodities in the markets.
The forward interest rate is based on the difference between the interest rates of different countries. It is the interest rate can be guaranteed at a present time to take care of the future investment or a future loan. The one-year forward exchange rate must give an equal value of the interest rates in the different markets. The interest rates at one point should be consistent with the conversion rate.
For example, if one needs a loan of 1000 dollars in the United States with an interest rate of 12% per Annum and in another country where the dollar rate is 1 to 5. The other country should consider, having an interest rate of 0.0248 and the forward rate of 4.575 so that after a year the amount of money earned as interest from both countries totals to 120 dollars.
Give your conclusions from the data.
The conversion rate decreases with time in the U.S LIBOR and the Euro LIBOR this is important in maintaining a balance between the prices of the commodities in the two countries preventing arbitrage from existing. The spot market cannot exist in this type of setup.
3. Outline the principles you are relying on in your answers to these questions in your final research project.
The output and the amount of income received from it.
Unemployment rates
The rates of inflation and deflation
Demand and supply of the commodity
The models of growth
Fiscal and monetary policies.
4. Create a summary of your findings with personal conclusions of the data uncovered.
The Japanese yen is likely to depreciate compared to the U. S dollar rate (Financial Forecast Centre, 2018)

The Chinese dollar will appreciate for the next five months and then depreciate compared to the U.S dollar (Financial Forecast Centre, 2018).
The New Zealand dollar is will sink in the next six months in comparison to the U.S dollar (Financial Forecast Centre, 2018).
The Hong Kong dollar is predicted to depreciate in the coming six months compared to the U.S dollar (Financial Forecast Centre, 2018)
The U.S dollar is gaining strength over the Singapore dollar in the next six months (Financial Forecast Centre, 2018).
The South Korean won is gaining strength against the United States dollar (Financial Forecast Centre, 2018).
The Indian rupee is gaining strength over the U.S dollar (Financial Forecast Centre, 2018).
The value of the Taiwanian dollar increases significantly in regards to the U.S dollar (Financial Forecast Centre, 2018).

References
Financial Forecast Centre . (2018). Market Vector .