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
As a general contractor, Conway Construction Corporation (CCC) entered into a written contract with Setcher Roofing Company (SRC) for all roofing. Is Setcher Roofing Company l
Bigg and Talle Corporation uses the percentage-of-sales method to estimate uncollectibles. Net credit sales for the current year amount to $5,000,000 and management estimates
ABC Corp. is expected to pay an annual dividend in the amount of $2.50 a share next year. This dividend constantly grows by 5 percent per year. The current price of the compan
Romig Enterprises, a U. S.- based firm, is considering a project in China to produce and sell compressors. It is a four- year project with an initial investment of USD 500,000
Dye Trucking raised $260 million in new debt and used this to buy back stock. After the recap, Dye's stock price is $7.5. If Dye had 80 million shares of stock before the reca
Orange Logistic is thinking of opening a new warehouse. The company owns the building that would be used, and it could see it for $100,000 after taxes if it decides not to ope
Northpoint is a federal contractor located in Washington DC, with 562 employees, of which 77 are engineers. Northpoint receives million of dollars in contracts every year. Nor
Isabel Lopez started Biz Consulting, a new business, and completed the following transactions during its first year of operations. a. I. Lopez invests $61,000 cash and office