Arbitrage funds available ($)Spot rate (yen-$1.00)180-day forward rate (yen-$1.00)180-day U.S. dollar interest rate (%)180-day Japanese ven interest rate (%)5,100,000118.55117.834.8033.391Kamada: CIA Japan (A). Takeshi Kamada, a foreign exchange trader at CreditSuisse (Tokyo), is exploring covered interest arbitrage possibilities. He wants to invest$5,100,000 or its yen equivalent, in a covered interest arbitrage between U.S. dollars andJapanese yen. He faced the following exchange rate and interest rate quotes:profit possible? If so, how?Is CIAThe CIA profit potential is -0.1899 %, which tells Takeshi Kamada that he should borrowthe Japanese yen and invest in the higher yielding currency, the U.S.dollar , to lock in acovered interest arbitrage (CIA) profit (Round to three decimal places and select fromthe drop-down menus.)Takeshi Kamada generates a CIA profit of by investing in therate currency, theand simultaneously selling theinterestproceeds forward intoat a forward premium which does not completely negate the interest differential

Step 1: Given the information.Arbitrage funds available ($) = 5,100,000 Spot rate (yen=$1.00) or…

Answered: Arbitrage funds available ($) Spot rate…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A bank in London, Ontario charges 1.75% commission to buy and sell currencies. Assume that the current exchange rate is US$1 = C$1.3973. a. How many Canadian dollars will you receive from the bank if you sell US$1,310? Round to the nearest cent b. How much commission will you pay the bank for this transaction?
K (Foreign exchange arbitrage) You own $7,000. The dollar rate in Tokyo is ¥215.9372/$. The yen rate in New York is given in the following table: Selling Quotes for Foreign Currencies in New York Country-Currency Japan-yen Contract Spot 30-day 90-day (Click on the icon in order to copy its contents into a spreadsheet.) Are arbitrage profits possible? Set up an arbitrage scheme with your capital. What is the gain in dollars? The net View an example $/Foreign Currency "Assuming no transaction costs, the rates in Tokyo and New York are out of line. Therefore, arbitrage profits are possible." The statement above is true (Select from the drop-down menu.) 0.004698 0.004741 0.004782 Get more help - ... from arbitrage would be $ (Round to the nearest cent.) Clear all Check answer
TB SA Qu. 06-69 If you had borrowed $1,000,000.... Use the information below to answer the following question. Exchange Rate $ 1.60 €1.00 $1.58 € 1.00 So ( $/ €) F360 ($/C) Interest Rate is ic APR 28 4% If you had borrowed $1,000,000, traded them for euro at the spot rate, and invested those euros in Europe, how many euros will you receive in one year?
The following are the foreign currency positions of an FI, expressed in the foreign currency: Currency Assets Liabilities FX Bought FX Sold Swiss franc (Sf) Sf 132,600 Sf 54,570 Sf 12,750 Sf 17,850 British pound (£) £ 42,500 £ 21,500 £ 15,500 £ 22,000 Japanese yen (¥) ¥ 8,200,000 ¥ 3,500,000 ¥ 1,600,000 ¥ 9,100,000 The exchange rate of dollars for Sf is 1.02, of dollars for British pound is 1.31, and of dollars for yen is .00953.The following are the foreign currency positions converted to dollars: Currency Assets Liabilities FX Bought FX Sold Swiss franc (Sf) $ 130,000 $ 53,500 $ 12,500 $ 17,500 British pound (£) $ 55,675 $ 28,165 $ 20,305 $ 28,820 Japanese yen (¥) $ 78,146 $ 33,355 $ 15,248 $ 86,723 a. What is the FI’s net exposure in Swiss francs stated in Swiss francs (Sf) and in dollars ($)?b. What is the FI’s net exposure in British pounds stated in British pounds (£) and in…
(14)
Required: Suppose you conduct currency carry trade by borrowing $1 million at the start of each year and investing in the New Zealand dollar for one year. One-year interest rates and the exchange rate between the U.S. dollar ($) and New Zealand dollar (NZ$) are provided below for the period 2000 - 2009. Note that interest rates are one-year interbank rates on January 1st each year, and that the exchange rate is the amount of New Zealand dollar per U.S. dollar on December 31 each year. The exchange rate was NZ$1.9108 per $ on January 1, 2000. Fill out columns (4) - (7) and compute the total dollar profits from this carry trade over the ten-year period. Also, assess the validity of uncovered interest rate parity based on your solution of this problem. You are encouraged to use the Excel spreadsheet software to tackle this problem. Note: Negative value should be entered with a minus sign. Enter profit value answers in dollars, rather than in millions of dollars. Do not round intermediate…
A bank in London, Ontario has a buying rate of CHF 1 = C$1.3547. If the exchange rate is CHF 1 = C$1.3841, calculate the rate of commission that the bank charges.
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Forward premiums/discounts. Referring to the forward quotes in the Wall Street Journal (Exhibit 5.5) for the Japanese yen, determine whether the yen is at a premium or discount against the U.S. dollar. What is the percentage premium/discount for maturities of one, three, and six months? Included images for reference
2. Money Market Hedge on Receivables Assume that Parker Company will receive 200,000 Canadian dollars in 360 days. Assume the following interest rates: 360-day borrowing rate 360-day deposit rate U.S. 6% 4% Canada 5% 3% Assume the forward rate of the Canadian dollar is $.80 and the spot rate of the Canadian dollar is $.78. If Parker Company uses a money market hedge, how much U.S. dollars will it receive in 360 days from its Canadian dollar receivable? (round to whole dollars) (2 points)
International financial management : MCQ Assume the Canadian dollar is equal to £0.51 and the Peruvian Sol is equal to £0.16. The value of the Peruvian Sol in Canadian dollar is: (a) about 3.1875 Canadian dollars. (b) about .3137 Canadian dollars. (c) about 2.36 Canadian dollars. (d) about .3137 British pound (e) about .3137 Peruvian Sol. 2. Assume that a bank’s bid rate on Swiss francs is £0.25 and its ask rate is £0.26. Its bid-ask percentage spread is: (a) about 3.85 (b) about 4.00% (c) about 3.55% (d) about 4.15%
A bank in London, Ontario charges 2.50% commission to buy and sell currencies. Assume that the current exchange rate is US$1 = C$1.3599. a. How many Canadian dollars will you receive from the bank if you sell US$1,340? Round to the nearest cent b. How much commission will you pay the bank for this transaction? Round to the nearest cent

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