Estimate the probability that exchange rate in four months

Assignment Help Financial Management
Reference no: EM131562527

An exchange rate is currently $0.8500 per unit of the foreign currency. The volatility of the exchange rate is 15%. Interest rate in $ is 5% while the interest rate in the foreign currency is 2%. Both rates are quoted per annum on a continuously compounded basis. Using the lognormal assumption, estimate the probability that the exchange rate in four months will be: a. less than or equal to $0.800, b. between $0.800 and $0.900, and c. greater than $0.900.

Reference no: EM131562527

Questions Cloud

Receivable policy will affect annie sustainable growth rate : Use the DuPont equation to determine how this change in accounts receivable policy will affect Annie's sustainable growth rate.
What was your rate of return in your investment in business : One year after that you sell your remaining interest in the business for $20,000. What was your rate of return in your investment in this business?
What is expected return-standard deviation of portfolio : What is the expected return and standard deviation of a portfolio that has 30% of its weight in KEY and 70% of its weight in APD?
How much interest was earned by the time you retire : At age 18 you are trying to decide to set up an IRA (individual retirement account) with an APR of 8%. how much interest was earned by the time you retire?
Estimate the probability that exchange rate in four months : An exchange rate is currently $0.8500 per unit of the foreign currency. estimate the probability that the exchange rate in four months will be:
A disadvantage of no-fault programs is that : A disadvantage of no-fault programs is that:
Calculate the monthly payment for each offer : Calculate the monthly payment for each offer. Which loan best meets your needs? is it the first, second, or third loan? explain?
If the effective annual risk-free rate of interest : If the effective annual risk-free rate of interest is 4% and there are three months until expiration, what should be the value of the put?
Discuss the factors giving rise to inverted futures market : Discuss the factors giving rise to an inverted futures market for a storable versus a non-storable commodity.

Reviews

Write a Review

Financial Management Questions & Answers

  How much could she withdraw each year in retirement

Suppose Jenna sells the bond, reinvests the proceeds, and then saves as she planned. - Jenna earns a 9% annual return on her savings, how much could she withdraw each year in retirement?

  What is the project internal rate of return

Mode Publishing is considering a new printing facility that will involve a large initial outlay and then result in a series of positive cash flows for four years. If you know that the project has a regular payback of 2.9 years, what is the project'..

  Original issue discount bonds must the firm issue to raise

Blackstone Energy is planning to issue two types of 25-year, How many OID bonds must the firm issue to raise the other $3 million?

  Calculate the net present value of the product

Plato Pharmaceuticals Ltd. has invested $100,000 to date in developing a new type of insect repellent. Calculate the net present value of the product.

  Based on a rate of return analysis

Jaguar lodges is the owner of an economy motel chain. Jaguar lodges is considering a new 200-unit motel. The estimated cost to build the motel is $8,000,000; Jaguar lodges estimates furnishings for the motel will cost an additional $700,000 and will ..

  What is the current value of the annuity

A 4-year annuity of eight $5,000 semiannual payments will begin 9 years from now, with the first payment coming 9.5 years from now. If the discount rate is 6 percent compounded monthly, what is the value of this annuity five years from now? If the di..

  Calculate the expected return and the volatility

Suppose Johnson? & Johnson and the Walgreen Company have the expected returns and volatilities shown? below, with a correlation of 21.7%. calculate: The expected return. The volatility? (standard deviation). The expected return. The expected return o..

  Issued bonds-what is the yield to maturity

PBJ Corporation issued bonds on January 1, 2006. The bonds had a coupon rate of 5.5% with interest paid semi annually. The face value of the bonds is 1,000$ and the bonds mature on January 1, 2021. What is the yield to maturity for an PBJ Corporation..

  Which the pure bond value equals conversion value

Calculate the crossover point at which the pure bond value equals conversion value. What is the conversion value?

  Required rate of return decreases as bond maturity increase

The change in price due to a change in the required rate of return decreases as a bond's maturity increases.

  What long-run growth rate can firm be expected to maintain

which is expected to continue this year and into foreseeable future. What is stock's required return? what long-run growth rate can firm be expected to maintain

  With reference to active versus passive portfolio management

Recall the EMH you learned in week 3. if everyone in the market believes in resistance levels, why do these beliefs not become self-fulfilling prophecies? With reference to the active versus passive portfolio management, what would happen to the mark..

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