Calculate the amount of profit

Assignment Help Corporate Finance
Reference no: EM13207946

A leader in your firm has been studying the foreign exchange market for a number of years and believes that she can predict several of the foreign currency exchange rates relative to the U.S. dollar. The firm has $500,000 to invest in the spot, forward, or options markets. Assume that the spot rate is $1.3435 to the euro andthat the forward rate for 12 months is $1.3705 to the euro. However, this leader is sure that the exchange rate in 12 months will be $1.41 to the euro.

In a Word document, include the following:

Explain how this leader in your firm can speculate on the belief that the euro will be $1.41 in 12 months.

Calculate the amount of profit (ignoring exchange rate fees) that can be earned and the percentage return achieved.

Recommend whether this speculative investment or another investment with similar or higher returns at lower risk should be selected. Explain your reasoning.

Be sure to consider how the inflation rate would affect the return.

Reference no: EM13207946

Questions Cloud

Discuss which design would best fit the clients needs : Use the unit 6 seminar/project case scenario (above) and use Visio 2007 to generate a diagram for the network topology. Briefly discuss which design would best fit the client's needs.
Define concerning the applicability of the titration method : concerning the applicability of the titration method, comment on if and how you could use it to determine ksp for each of the following: a. barium hydroxide c. copper(ii) iodate
What is the value of x given the specified value for y : What is the value of X given the specified value for Y (both X are 8-bit unsigned values): /* which is 10100101 in Binary; a) Y=0xA5; X=Y & 0x0F; b) Y=ox88; X=Y | ox83; C) Y=0x25; X=Y && ~Y;
How is file management utilized and managed : How is file management utilized and managed? What tools can you use? For those of you who work, how is file management managed in your place of business?"
Calculate the amount of profit : Calculate the amount of profit that can be earned and the percentage return achieved and explain how this leader in your firmcan speculate on the belief that the euro will be $1.41 in 12 months.
Can a computer system function without one of these element : - What purposes do CPUs, memory and I-O devices individually serve in a computer system? - How do these 3 elements work together to compute? - Can a computer system function without one of these elements?
Show importance of small differences in the rate of growth : Consider the case of two countries that start with equal levels of GDP. The growth rate of the first country is 3% while the growth rate of the second country is 4%. After 25 years, the level of GDP in the second country is more than 25% larger.
Explain the volume of methane : The heat combustion of ch4 is 890.4 the heat capacity of h20 is 75.2. find the volume of methane measured at 298k and .690atm reauired to convert
How are these examples of predefined control events : How are these examples of predefined control events and its usage in programming. • Delegate - Object that contains a reference to a method - Encapsulates a method - Provides a way for a program to take alternative courses when running •

Reviews

Write a Review

 

Corporate Finance Questions & Answers

  What is the maximum amount of money

You have been offered a project paying $300 at the beginning of each year for the next 20 years. What is the maximum amount of money you would invest in this project if you expect 9 percent rate of return to your investment?

  Find expected rate of return & standard deviation of return

Consider the following probability distribution of returns estimated for a proposed project that involves a new ultrasound machine:

  Should the company buy and install the machine press

The press also requires an initial investment in spare parts inventory of RM19,000, along with an additional RM2,000 in inventory for each succeeding year of the project. If the tax rate is 35 percent and the discount rate is 12 percent, should th..

  Calculate stock beta

The standard deviation of stock returns for Stock A is 30 percent. The standard deviation of the market return is 20 percent and correlation between Stock A and the market is .75.

  Difference between arithmetic and geometric averages

Please explain and define in your own terms the difference between arithmetic and geometric averages.

  Develop a financial plan to evaluate the venture

Karl believes that he could invest his redundancy lump sum at 5% per annum and therefore suggests that you use 5% as the after tax discount rate for a discounted cash flow analysis.

  What is the payback period for this project

What is the payback period for this project? If their acceptance period is three years, will this project be accepted?

  Write a short paper advising bill

Write a short paper advising Bill and Darlene what business form you would recommend for them as they start up their business. State any assumptions you make.

  Relationship between portfolio risk and stocks in portfolio

What can you say about the relationship between portfolio risk and the number of stocks in the portfolio? What do you think is responsible for this relationship?

  How much is invested per barrel

Transportation is $4 per barrel and paid when received. If the risk free annual interest rate  is 10%, what is the value per barrel after received in the U.S.?  If it is received 3 months late, how much is invested per barrel when it is received?

  What monthly lease payment must nantucket charge

What monthly lease payment must Nantucket charge to earn at a 12% return on its investment if the plane Wings wants costs $1.5 million?

  What is the value of the levered firm

What is the value of the levered firm and what would happen if debt went down by 20%?

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