Title: Avoid Losing $35,000 Tagline: Avoid Losing $35,000: How the Interest Rate Parity Calculator Protected a Family's Overseas Investment Problem: Sarah and Tom, a dual-income couple in their early 40s with three children, are diligently saving for their kids' college funds. They've allocated $200,000 of their portfolio to a high-yield bond denominated in Australian Dollars (AUD) expecting an attractive 5% annual return. However, they are worried about the potential impact of fluctuating exchange rates between the USD and AUD on their overall returns. They are unsure if the higher yield truly compensates for the currency risk and need a way to assess if their investment is actually providing the expected return when converted back to USD. They fear losing a significant portion of their investment's value due to adverse currency movements. Solution: By using the Interest Rate Parity Calculator, Sarah and Tom can quickly determine if the higher yield offered by the AUD bond is sufficient to offset the risk of currency fluctuations. They input the current spot exchange rate (USD/AUD), the interest rate of the USD (US Treasury Bills at 3%), and the interest rate of the AUD bond (5%). The calculator reveals that the implied forward exchange rate suggests the AUD is expected to depreciate against the USD. They then compare this implied rate with actual forward rates available in the market. They discover that the market expects a greater depreciation than the IRP suggests, meaning they are under-hedged with their current strategy. They use this information to adjust their hedging strategy to fully compensate for this expected depreciation, utilizing forward contracts to lock in a more favorable exchange rate when the bond matures. ROI: By actively hedging against the predicted currency depreciation identified by the Interest Rate Parity Calculator, Sarah and Tom avoid a potential $35,000 loss (17.5% of their AUD investment value converted back to USD) due to unfavorable exchange rate movements over the investment period. The calculator empowered them to make informed decisions and secure their investment's intended return. Description: Ensure your international investments aren't eroded by unfavorable exchange rates. This calculator quickly identifies potential arbitrage opportunities and helps you hedge your currency risk. Make smarter, safer global investment decisions today. Category: Client Service