International Finance – currency exchange rate, business & finance homework help

Hi Tutors,

I need answers for the following two questions:

1.The following data was current on 11/07/2017:

Country Promised Yield to Maturity of 10 Year Government Bonds

Australia 2.75%pa

Germany 0.54%pa

Japan 0.08%pa

Switzerland -0.05%pa

United Kingdom 1.27%pa

United States of America 2.39%pa

Assume for the sake of this assignment that these bonds are zero coupon bonds, so that their yields can be interpreted as annualised interest rates.

The following spot exchange rates were current on 11/07/2017:

Currency Pair Spot Exchange Rate

AUD/USD 0.76

EUR/USD 1.14

GBP/USD 1.29

JPY/USD 0.0087

SFR/USD 1.03

Calculate the implied expected future exchange rates ten years in the future, based on the above data and on the assumption that uncovered interest rate parity applies. Show your workings.

2. The promised yield to maturity on 10 year
government bonds issued by the governments of France and Italy are 0.90%pa and
2.26%pa. What is the most plausible explanation of the difference in yields
between French, Italian and German government bonds?

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