Concept of the covered interest rate parity imply in case

Assignment Help Financial Management
Reference no: EM132014521

Suppose that the treasurer of IBM has an extra cash reserve of $100,000,000 to invest. The interest rate is 8 percent per annum in the United States and 7 percent per annum in Germany. Currently, the spot exchange rate is $1.20 per Euro and the one year forward exchange rate is $1.18 per dollar. The treasurer of IBM does not wish to bear any exchange risk. Where should he/she invest to maximize the return?. What current spot exchange rate would the concept of the covered interest rate parity imply in this case?

Reference no: EM132014521

Questions Cloud

Assuming market is in equilibrium : Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years?
What yield will this investor realize : Assume that an investor pays $920 for a long-term bond that carries a coupon of 11%. what yield will this investor realize?
The risk-adjusted cost of capital for particular division : What procedures are used to determine the risk-adjusted cost of capital for a particular division? What approaches are used to measure a division’s beta?
Some type of replacement chain analysis : Would the failure to employ some type of replacement chain analysis bias an NPV analysis against one of the projects? Explain.
Concept of the covered interest rate parity imply in case : What current spot exchange rate would the concept of the covered interest rate parity imply in this case?
Cause change in the irr ranking of two such projects : Would changes in the cost of capital ever cause a change in the IRR ranking of two such projects? Why or why not?
Expensive car for your new delivery service : You are trying to pick the least-expensive car for your new delivery service.
Company produce to maximize their weekly profit : How many plates in each category should the company produce to maximize their weekly profit?
The discount rate when analyzing the acquisition of firm : Which of these rates is most appropriate to use as the discount rate when analyzing the acquisition of Firm B by Firm A?

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