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Assume that the current spot exchange rate is FF6.25/$ and the 3 month forward exchange rate is FF6.28/$. The 3 month interest rate is 5.6% per year in the U.S. and 8.8% per year in France. Suppose that you can borrow up to $1,000,000 or FF6,250,000.
a. Define how to realize a certain profit via covered interest arbitrage, assuming that you wish to realize profit in terms of U.S. dollars. As well determine the magnitude of arbitrage profit.
b. Suppose that you want to realize profit in terms of French francs. Define the covered arbitrage process and determine the arbitrage profit in French francs.
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Company X is expected to maintain a constant 7% growth rate in their dividends, indefinitely. If company X has a dividend yield of 4%, what is the required return on their shares?
When a borrower uses repo market for fund financing, he has to deliver the securities to the lender. One way to do this is to deliver the collateral to the lender
how to calculate trend analysis?
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