• • • 4. Your company has to make a US $1 million payment in three months' time. The dollars are available now. You decide to invest them for three months and you are given the following information - - - the US deposit rate is 8% per annum the sterling deposit rate is 10% per annum the spot exchange rate is $1.80/pound the three month forward rate is $1.78/pound Where should your company invest for better returns? a. b. Assuming that the US interest rate and the spot and forward rates remain as in the original question, where would you invest if the sterling deposit rate were 14% per annum?
• • • 4. Your company has to make a US $1 million payment in three months' time. The dollars are available now. You decide to invest them for three months and you are given the following information - - - the US deposit rate is 8% per annum the sterling deposit rate is 10% per annum the spot exchange rate is $1.80/pound the three month forward rate is $1.78/pound Where should your company invest for better returns? a. b. Assuming that the US interest rate and the spot and forward rates remain as in the original question, where would you invest if the sterling deposit rate were 14% per annum?
Chapter20: Short-term Financing
Section: Chapter Questions
Problem 3IEE
Related questions
Question
Transcribed Image Text:•
•
•
4. Your company has to make a US $1 million payment in
three months' time. The dollars are available now. You
decide to invest them for three months and you are given
the following information
-
-
-
the US deposit rate is 8% per annum
the sterling deposit rate is 10% per annum
the spot exchange rate is $1.80/pound
the three month forward rate is $1.78/pound
Where should your company invest for better
returns?
a.
b. Assuming that the US interest rate and the spot and
forward rates remain as in the original question, where
would you invest if the sterling deposit rate were 14% per
annum?
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