Reference no: EM13881127
Suppose Japanese yen money market annual rate is .60% and U.S. money market has an annual rate of 4.50%.
1) The predictions on the spot rate in 6 months made by financial analysts X and Y are ¥116/$ and ¥114/$ respectively. If the spot rate today is ¥115/$, which prediction do you think is more reasonable, why?
2) What should be the spot rate in 6 months based on parity condition?
3) If the forward rate in 6 months is ¥113/$, will there be arbitrage opportunity, why? If yes then which investment strategy will offer you profit (hint: borrow or lend, dollar or yen, buy or sell forward)?
4) Suppose you adapt the correct arbitrage strategy with the starting investment value of $43,478.2609 or ¥5,000,000, what will be the net proceeds? Please show each step clearly.
5) If financial analyst X believes his prediction is right, then what he would do to explore the market profit opportunity?
6) What is the key difference between the strategy adopted by analyst X in part 5 and the strategy in part 4?
|
Brant cargo to record the purchase of the equipment
: 1.At January 1, 2013, Brant Cargo acquired equipment by issuing a five year, $150,000 (payable at maturity), 4% note. The market rate of interest for notes of similar risk is 10%.
|
|
Use duration to estimate the new price of the bond
: Consider a 6 percent coupon bond with twelve years to maturity and a current price of $1,062.40. Suppose the yield on the bond suddenly increases by 2 percent. Use duration to estimate the new price of the bond. Calculate the new bond price.
|
|
Difference between a partnership and a corporation
: What is the difference between a partnership and a corporation?
|
|
What is the annual interest amount for the bond
: James McCulloch purchased a 20-year U.S. Treasury bond four years ago for $8,500. The bond paid 3.500 percent annual interest. Four years later he sold the bond for $8,580. What is the annual interest amount for the bond? What is the total interest M..
|
|
Key difference between the strategy adopted by analyst
: Suppose Japanese yen money market annual rate is .60% and U.S. money market has an annual rate of 4.50%. The predictions on the spot rate in 6 months made by financial analysts X and Y are ¥116/$ and ¥114/$ respectively. If the spot rate today is ¥11..
|
|
Typically within the control of the organization
: Use both research and your personal experience to develop a SWOT analysis of your college or university (your school's website is almost certainly a rich source of information). Remember that strengths and weakness are internal, and typically within ..
|
|
The overall business strategy
: Describe how you would handle the decision making process in the following scenario: You and a close family member have decided to open your own retail clothing store. You have equal investment risk, but different skill sets that bring a well-rounded..
|
|
Prepare the lessee''s entry at the inception of the lease
: 1.At the beginning of 2013, VHF Industries acquired a machine with a fair value of $6,074,700 by signing a fouryear lease. The lease is payable in four annual payments of $2 million at the end of each year.
|
|
Assume bradley link induced conversion
: When the common stock price reached an all time high of $37 in December of 2014, 40% of the warrants were exercised.
|