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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.)
Prepare a balance sheet and income statement . Inventory $ 6500 Cash 16550 Accounts Rec 9600 Buildings & Equip. 122,000 accumulated deprec. (34,000) Common stock $45,000 Short-term notes 600 Accounts payable 4,800 Long-term debt 55,000 retained ea..
You purchase a bond with an invoice price of $1,125. The bond has a coupon rate of 10.5 percent, semiannual coupons, and there are four months to the next coupon date.
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An investor deposits $50,000 today in the interest bearing account. How much would the investor accumulate by the end of five years if interest is compounded monthly?
Consider the following uneven cash flow stream. What is the future value, if the opportunity cost rate is 6%? Show your work.
a.What is the market price of a zero-coupon bond with face value $126 and 1 month maturity? (Round your answer to 2 decimal places. Omit the "$" sign in your response.)
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What is the benefit of scenario analysis if it does not produce an accept or reject decision for a proposed project?
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