Should capital one bank pursue this strategy

Assignment Help Financial Management
Reference no: EM131304018

1) Bank of America’s bid price for Canadian dollars is $.7938 and its ask price is $.81. What is the bid/ask percentage spread?

2) Compute the bid/ask percentage spread for Mexican pesos retail transactions in which the ask rate is $.11 and the bid rate is $.10?

3) The Walmart Corporation is a U.S exporter that invoices its exports to the United Kingdom in British pounds. If it expects that the pound will appreciate against the dollar in the future, should it hedge its exports with a forward contract? Explain?

4) If the direct exchange rate of the Euro is worth $1.25, what is the indirect rate of the Euro? What is the value of the U.S dollar in Euros?

5) Assume Poland’s currency (zloty) is worth $.17 and the Japanese yen is worth $.008. What is the cross rate of the zloty with respect to the yen? How man yen equals a zloty?

6) JP Morgan Chase Bank expects that the Mexican peso will depreciate against the dollar from its sport rate of $.15 to $.14 in 10 days. The following interbank lending and borrowing rates exist:

                                                Lending Rate      Borrowing Rate

U.S dollar                                    8.0%                     8.3%

Mexican peso                           8.5%                     8.7%

Assume that JP Morgan Chase has a borrowing capacity of either $10 million or $70 million pesos in the interbank market, depending on which currency it wants to borrow.

a) How could JP Morgan Chase attempt to capitalize on its expectations without using deposited funds? Estimate the profits that could be generated from this strategy?

b) Assume all the preceding information with this exception: JP Morgan Chase expects the peso to appreciate from its present spot rate of $.15 to $.17 in 30 days. How could it attempt to capitalize on its expectations without using deposited funds? Estimate the profits that could be generated from this strategy?

7) Capital One Bank expects that the Singapore dollar will depreciate against the U.S dollar from its spot rate of $.43 to $.42 in 60 days. The following interbank lending and borrowing rates exist:

                                                Lending Rate                      Borrowing Rate

U.S dollar                                     7.0%                                       7.2%

Singapore dollar                        22.0%                                   24.0%

Capital one Bank considers borrowing $10 million Singapore dollars in the interbank market and investing the funds in dollars for 60 days. Estimate the profits (or losses) that could be earned from this strategy. Should Capital One Bank pursue this strategy?

Reference no: EM131304018

Questions Cloud

Estimated future cash flows of the company : In the stock valuation model, Intrinsic value is based on which of the following factors? I the applied discount rate. II. the amount of risk inherent in a particular stock. III. historical net profits of the company. IV. estimated future cash flows ..
How legal and regulatory forces influence pricing decisions : In what ways do other marketing-mix variables affect pricing decisions?- How do legal and regulatory forces influence pricing decisions?
Discuss implications of social change and diversity : Explain the social change within the family: (by researching opposing viewpoints):Explain the positive changes and negative changes that have occurred within the family regarding your topic.Discuss areas of social change: gender role changes, the ef..
Write a paper about londons historic drury lane theatre : Write a research paper about London's Historic Drury Lane Theatre. Think originality and creativity...that is, graphics, charts, images/videos, Powerpoint/Prezi programs, audio or visual presentations, etc.
Should capital one bank pursue this strategy : Compute the bid/ask percentage spread for Mexican pesos retail transactions in which the ask rate is $.11 and the bid rate is $.10? Capital one Bank considers borrowing $10 million Singapore dollars in the interbank market and investing the funds in ..
What is the aim of monetary policy : What is the aim of monetary policy? What is meant by economic well-being?
Compare and contrast trade discount and a quantity discount : Compare and contrast a trade discount and a quantity discount.- What is the reason for using the term F.O.B.?- What are the major methods used for transfer pricing?
Compute ace corporation break-even point in sales : Ace Corporation produced and sold 140,000 units of its only product during the year just ended at an average price of $15 per unit. Compute Ace Corporation's break-even point in sales units for the year just ended
Explain which goal you think should have the top priority : Over the past several years, which of the Fed's six goals for monetary policy has become a more important Fed policy goal? Explain which goal you think should have the top priority.

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd