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Speculation. You will use the following scenario to fill in the blanks. Blue Demon Bank expects that the Mexican peso will depreciate against the dollar from its spot rate of $.15 to $.14 in 10 days. The following interbank lending and borrowing rates exist: U.S. dollar Lending Rate: 8.0%. Borrowing Rate: 8.3%. Mexican peso Lending Rate: 8.5%. Borrowing Rate: 8.7%. Assume that Blue Demon Bank has a borrowing capacity of either $10 million or 70 million pesos in the interbank market, depending on which currency it wants to borrow. How could Blue Demon Bank attempt to capitalize on its expectations without using deposited funds? Estimate the profits that could be generated from this strategy. Blue Demon Bank can capitalize on its expectations about pesos (MXP) as follows: Note, Steps 1, 2, and 5 have been completed for you: 1: Borrow MXP70 million 2: Convert the MXP70 million to dollars: MXP70,000,000 × $.15 = $10,500,000 3: Lend the dollars through the interbank market at 8.0% annualized over a 10 day period. The amount accumulated in 10 days is:______________ 4: Repay the peso loan. The repayment amount on the peso loan is:_____________ 5: Based on the expected spot rate of $.14, the amount of dollars needed to repay the peso loan is: $9,823,683. 6: After repaying the loan, Blue Demon Bank will have a speculative profit (if its forecasted exchange rate is accurate) of: ________. What are the blanks for questions 3, 4, and 6?
Winston Enterprises would like to buy some additional land and build a new factory. The anticipated total cost is $148.17 million. The owner of the firm is quite conservative and will only do this when the company has sufficient funds to pay cash for..
A partial balance sheet and income statement for King Corporation follow: The trade receivables at December 31, 2010, were $280,000, net of an allowance of $8,000, for a gross receivables figure of $288,000. The inventory at December 31, 2010, was $5..
You want to buy a car, and a local bank will lend you $40,000. The loan will be fully amortized over 5 years (60 months), and the nominal interest rate will be 7% with interest paid monthly. What will be the monthly loan payment?
The ______ is used by financial managers for dissecting a firm's financial statements to assess it's financial condition. In general, firms that are subject to a high degree of ____, relatively short production cycles, or both, tend to use shorter pl..
1 in 1930 the highest paid player in major league baseball was babe ruth of the new york yankees with an annual salary
Written Assignment: You have decided to invest in an equally weighted portfolio consisting of American Express, Proctor & Gamble, Home Depot, and E. I. du Pont and need to find the beta of your portfolio. Go to finance.yahoo.com, find the ticker symb..
Business risk
Assume that the economy has three types of people. 20% are fad followers, 70% are passive investors, and 10% are informed traders. The portfolio consisting of all informed traders has a beta of 1.2 and an alpha of 2.86%. What is the alpha for the fad..
Suppose that a firm that operates in a perfect world has assets worth $12,000, no debt,, and 300 shares outstanding. If this firm pays a dividend of $6.50 to each shareholder, what will the share price be after the dividend is paid?
Jane Chang is making plans for a summer vacation. She will take $1,000 with her in the form of traveler’s checks. From the newspaper, she finds that if she purchases the checks by May 31, she will not have to pay a service charge.
Which of the following requires an accounting transfer at fair market value from retained earnings?
An investor has two bonds in his portfolio that both have a face value of $1,000 and pay a 10% annual coupon. Bond L matures in 17 years, while Bond S matures in 1 year. What will the value of the Bond S be if the going interest rate is 9%? Round you..
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