Hedge through covered interest arbitrage
Course:- Financial Management
Reference No.:- EM13942981

Assignment Help >> Financial Management

You are expecting to receive 10M Euros 3-months from now. The interest rates are 3% in the US and 5% in Germany. Current spot exchange rate: $1.20/Euro and 3-month Forward rates: $1.15/Euro.

a. How much $ will you have 3-months from now if you hedge through covered interest arbitrage?

b. How much will you have if you hedge through forward contract?

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Financial Management) Materials
You are going to invest in Asset J and Asset S. Asset J has an expected return of 14.6 percent and a standard deviation of 55.6 percent. Asset S has an expected return of 11.6
The duties of an agent to her principal are loyalty, obedience, performance and which of the following: Administrative law agencies usually have three types of authority.
Sales for Hanebury Corporation’s just-ended year were $12 million. Sales were $6 million 5 years earlier. a. At what rate did sales grow? b. Suppose someone calculated the sal
Relate your answers to the movie ‘Inside Job’. What are the unintended consequences of financial innovation? What are the unintended consequences of regulation? Explain how th
What would you pay for a $200,000 bond that matures in 10 years and pays 8% interest (stated or coupon rate) a year if you wanted to earn a yield of 6% (market rate)? Please s
The stock of Pills Berry Company is currently selling at $60 per share. The firm pays a dividend of $1.80 per share. What is the annual dividend yield? If the firm has a payou
Ben corporation has sales of 5000000, net income of 800000, total assets of 2000000, and 100000 shares of common stock outstanding. if ben's P/E ratio is 12, what is the compa
Let’s assume that you have been asked to calculate risk-based capital ratios for a bank with the following accounts. Calculate the equity capital ratio. Calculate the Tier 1 R