Exchange rate between the dollar and the brazilian real

Assignment Help Financial Management
Reference no: EM131461886

Suppose the spot and 3-month forward rates on the Brazilian real (BRL) are $1 = BRL3.2573 and $1 = BRL3.3550, respectively. The annual risk-free rate in the US is 2.36%, & the annual risk-free rate in Brazil is 10.46%.

a. Is there an arbitrage opportunity here? If so, how would you exploit it if you can borrow up to BRL162,865 or $50,000?

b. What must the 3-month exchange rate between the dollar and the Brazilian real (BRL) be to prevent arbitrage?  

Reference no: EM131461886

Questions Cloud

Should the company make the investment : The risk-free rate in the US is 1.42% and the risk-free rate in Mexico 3.57%. The dollar required return is 13%. Should the company make the investment?
What is the break-even exchange rate : What is the break-even exchange rate in American terms rounded to 4 decimal places?
An annual interest rate : How many years will it take $2 million to grow to $6.60 million with an annual interest rate of 9 percent?
What is the firms degree of financial leverage : What is the firm’s degree of financial leverage?
Exchange rate between the dollar and the brazilian real : Suppose the spot and 3-month forward rates on the Brazilian real. exchange rate between the dollar and the Brazilian real (BRL) be to prevent arbitrage?
Expects all assets-current liabilities to shrink with sales : After adding a new line of widgets, Worldwide expects all assets and current liabilities to shrink with sales.
Started his own business to sell product he has developed : John has recently started his own business to sell a new product he has developed.
What is the indicated market value of the subject property : What is the indicated market value of the subject property?
What is intended value of the subject based on both comps : What is intended value of the subject based on both comps?

Reviews

Write a Review

Financial Management Questions & Answers

  Residual distribution model

Puckett Products is planning for $5 million in capital Expenditures next year. Puckett’s target capital structure consists of 60% debt and 40% equity.

  Initiating a cash discount

Gardner Company currently makes all sales on credit and offers no cash discount. The amount of cost that will be saved due to the reduction in average? A/R is

  What tax rate is required to meet budgetary demands

The total assessed property value in Frame town is $77,000,500. Budget planners have determined that $5,140,900 will required providing all government services next year. What tax rate is required to meet budgetary demands? (Express your answer as a ..

  Explain what is meant by bootstrapping

Explain what is meant by bootstrapping when raising seed financing and why bootstrapping is important. Describe the role of venture capitalists in the economy and discuss how they reduce their risk when investing in start-up businesses.

  Other companies of their top talent to fill vacant

Corporate headhunters have been known to raid other companies of their top talent to fill vacant or new positions for their clients. Is it ethical to contact the CEO of one company and lure him or her to join the management team of another company?

  1 a japanese exporter to brazil would like to sell its

1. a japanese exporter to brazil would like to sell its brl300m receivables in the spot market against yen. the

  Service staff with an electronic ordering process

A restaurant is contemplating replacing its service staff with an electronic ordering process. Installing computers at each table will cost $150,000, but is expected to generate a cost savings of $40,000 per year for the next 10 years, when the compu..

  Ethical standard for corporations financial-tax reporting

Outline your findings on the ethical standard for a corporation's financial and tax reporting. State specific examples of the ethical standards and laws that you are following as the tax and financial analyst. Based on your research, state recent exa..

  What is the future rate of inflation assumed

If their combined life expectancy is 15 years at their retirement, can the Bruckners maintain their standard of living if they have the amount determined above and their funds earn 7 percent after they retire? What is the future rate of inflation ass..

  Examine and discuss the evolving role of the cfo

Examine and discuss the evolving role of the CFO. What significant changes have occurred in recent years? What changes do you see evolving in the next 10 years? Support each of your observations with credible references.

  What is the yield to maturity for these bonds

Blue Crab, Inc. plans to issue new bonds, but is uncertain how the market would set the yield to maturity. The bonds would be 10-year to maturity, carry a 15.88 percent annual coupon, and have a $1,000 par value. Blue Crab, Inc. has determined that t..

  Increase the WACC of a firm

Which of the following will increase the WACC of a firm?

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