Relative to the usd direct or indirect quotations

Assignment Help Financial Management

Reference no: EM131933847

Assume that on December 6, 2017, the spot rate for Canadian Dollars was 1.3353 CAD/1 USD. The 180-day (6 month) forward rate quoted in the market was for 1.3436 CAD/1 USD and the risk-free rate on 180-day securities was 0.66 percent APR for United States LIBOR and 1.91 percent APR for Canadian LIBOR. (LIBOR rates are widely used as a reference rate for financial instruments.) Assume that the US is the home country.

a. Are the quotes for CAD above relative to the USD direct or indirect quotations? Circle one: direct or indirect

b. Is the USD expected to appreciate or depreciate relative to the CAD given the forward rate quoted above? Circle one: appreciate or depreciate

c. What is the implied forward rate if interest rate parity holds in this case? Does interest rate parity hold here? Use 4 decimal places for accuracy. Implied forward rate _________

d. Which country’s risk free security offers the highest expected $ profit for a US investor, or are the $ profits the same? Determine the $ profit for both investments using a beginning amount of 1,000,000 USD. US LIBOR $ profit ________ Canadian LIBOR $ profit ________.

Reference no: EM131933847

Questions Cloud

Current market value of firm equity and earnings per share : Calculate the current market value of firm equity and the earnings per Share (EPS).

What is the profitability index for each project : What is the profitability index for each project? What is the NPV for each project?

Evaluate introducing new soda line : Suppose you have been hired as a financial consultant to Trader Joe's to evaluate introducing a new soda line.

Company need to raise to finance the extra dividend payment : How much new equity capital will the company need to raise to finance the extra dividend payment?

Relative to the usd direct or indirect quotations : Are the quotes for CAD above relative to the USD direct or indirect quotations? Circle one: direct or indirect

Revenue is from side effects of the additional product : What amount of next year's revenue is from side effects of the additional product?

What is cost of equity : Murphy Ink has bonds outstanding with a face value of $145,000.00 that are selling at par. What is the cost of equity?

The initial costs for net working capital : What amount should be included in the initial costs for net working capital?

The goal of negotiation is to develop short-term partnership : Generally, the goal of negotiation is to develop a short-term partnership with a buyer.

User Account

All Pages