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Suppose the annual interest rate is 2.5% in U.S. and 1.5% in Japan., and that the spot exchange rate is S(¥/$) = 102 and the forward exchange rate with 12-month maturity is F12(¥/$) = 102.35 Assume you are a U.S. trader and can borrow up to $1,000,000 or ¥102,000,000. Answer the following questions.
(a) Is there an arbitrage opportunity according to the Interest Rate Parity based on the above information?
(b) Show the strategy to capture the arbitrage profit by setting up the transactions required at t=0 (i.e., today) and cash flows at t=0 and t=1 (i.e., today and 1-year from today) in a transaction table format. (Your arbitrage profit should be in U.S. dollar.)
a. suppose the real interest rate is 3 per year and the expected inflation rate is 8. what is the nominal interest
Explain what is the net cash flow at time 0 if the old equipment is replaced and what are the NPV and IRR of the replacement project
1. Whitley Transport Company is a regional trucking company headquartered in a southeastern city of the U. S. The company's risk manager is trying to decide whether to recommend to senior management that all of the company's drivers be require..
1. Which of the following business organizational forms subjects the owner(s) to unlimited liability? 2. Which of the following business organizational forms is easiest to raise capital?
A Treasury dealer quotes the following 182-day bill at a 3.956% discount. What is the price of the security?
as an organizational leader investing your companyrsquos cash would you choose stocks bonds or derivatives for
If america auto companies make a breakthrough in automobiles technology and are able to produce a car that gets 60 miles to the gallon, what will happen to the U.S. exchange rate?
The initial proceeds per bond, the size of the issue, the initial maturity of bond, and the years remaining to maturity are shown in the following table for number of bonds.
question given the following informationtotal assets100000debt 12 interest rate80000equity20000variable costs of
For the problem above, if the flotation cost for new preferred stock is $1.20, what is the cost of new preferred stock?
Based on the following information, calculate the coefficient of variation and select the best investment based on the risk/reward relationship.
Find the bond's price now, and six months from now after the next coupon is paid. What will the holding period rate of return for the next six months be?
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