Kamada: CIA Japan (A). Takeshi Kamada, a foreign exchange trader at Credit Suisse (Tokyo), is exploring covered interest arbitrage possibilities. He wants to invest $5,050,000 or its yen equivalent, in a covered interest arbitrage between U.S. dollars and Japanese yen. He faced the following exchange rate and interest rate quotes: Is CIA profit possible? If so, how? The CIA profit potential is%, which tells Takeshi Kamada that he should borrow the drop-down menus.) Data table G and invest in the higher yielding currency. (Click on the following icon in order to copy its contents into a spreadsheet.) Arbitrage funds available Spot rate (= $1.00) 180-day forward rate (V= $1.00) 180-day U.S. dollar interest rate 180-day Japanese yen interest rate $5,050,000 118.58 117.88 4.807% 3.396% - X to lock in a covered interest arbitrage (CIA) profit. (Round to three decimal places and select from

Kamada: CIA Japan (A). Takeshi Kamada, a foreign exchange trader at Credit Suisse (Tokyo), is exploring covered interest arbitrage possibilities. He wants to invest $5,050,000 or its yen equivalent, in a covered interest arbitrage between U.S. dollars and Japanese yen. He faced the following exchange rate and interest rate quotes: Is CIA profit possible? If so, how? The CIA profit potential is%, which tells Takeshi Kamada that he should borrow the drop-down menus.) Data table G and invest in the higher yielding currency. (Click on the following icon in order to copy its contents into a spreadsheet.) Arbitrage funds available Spot rate (= $1.00) 180-day forward rate (V= $1.00) 180-day U.S. dollar interest rate 180-day Japanese yen interest rate $5,050,000 118.58 117.88 4.807% 3.396% - X to lock in a covered interest arbitrage (CIA) profit. (Round to three decimal places and select from

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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Bank of America is willing to buy or sell Canadian dollar for $.99. The bank is willing to buy or sell Nepalese rupee at an exchange rate of 97 rupee per dollar. The bank is willing to purchase Canadian dollar at an exchange rate of 1 rupee = .0104 Canadian dollars. Show how you can make a profit from triangular arbitrage. What would be your profit or loss if you had $16,000? What %?
Samuel Samosir works for Peregrine Investments in Jakarta, Indonesia. He focuses his time and attention on the U.S. dollar/Singapore dollar ($/S$) cross-rate. The current spot rate is $1.39/S$. After considerable study, he has concluded that the Singapore dollar will appreciate versus the U.S. dollar in the coming 90 days, probably to about $1.44/S$. He is considering trading options to profit and has the following options on the Singapore dollar to choose from: Option choices on the Singapore dollar: Strike price (US$/Singapore dollar) Premium (US$/Singapore dollar) Call on S$ $1.35 $0.047 Put on S$ $1.359 $0.006 Samuel decides to sell one put option in Singapore dollars. What will be Samuel's profit/loss if the ending spot rate is $1.311/S$ in 90 days? Keep all decimal places. Please type in the number without the currency signs. For example, if your answer is $1.25/S$, then type in 1.25 as your final answer.
You work for a Space Mountain Rollercoasters, which is a firm whose home currency is the Mexican peso (MXN) and that is considering a foreign investment. The investment yields expected after-tax Turkish lira (TRY) cash flows (in millions) as follows: Year 0 Year 1 -TRY1,100 TRY625 Government bond yield Expected inflation Project required return Year 2 TRY625 Assume that Covered Interest Rate Parity holds and that your firm's management believes that Relative Purchasing Power Parity is the best way to predict future exchange rates over this investment's time horizon. You also have the following information: MXN O a. The gain from hedging with forwards is MXN 67.56 million O b. The gain from hedging with forwards is MXN 69.21 million O c. The gain from hedging with forwards is MXN 66.37 million O d. The gain from hedging with forwards is MXN 65.42 million O e. The gain from hedging with forwards is MXN 67.92 million Year 3 10.16% p.a. 7.00% p.a. 14.811% p.a. TRY625 TRY 14.24% p.a. 12.00%…
PLEASE ANSWER FULLY AND CORRECTLY: DO NOT GIVE ME THE WRONG ANSWER Suppose a U.S. investor wishes to invest in a British firm currently selling for £40 per share. The investor has $10,000 to invest, and the current exchange rate is $2 per £. Consider three possible prices per share at £35, £40, and £45 after 1 year. Also, consider three possible exchange rates at $1.80 per £, $2 per £, and $2.20 per £ after 1 year. Calculate the standard deviation of both the pound- and dollar-denominated rates of return if each of the nine outcomes (three possible prices per share in pounds times three possible exchange rates) is equally likely. Note: Do not round intermediate calculations. Round your percentage answers to 2 decimal places.
Samuel Samosir works for Peregrine Investments in Jakarta, Indonesia. He focuses his time and attention on the U.S. dollar/Singapore dollar ($/S$) cross-rate. The current spot rate is $1.39/S$. After considerable study, he has concluded that the Singapore dollar will appreciate versus the U.S. dollar in the coming 90 days, probably to about $1.44/S$. He is considering trading options to profit and has the following options on the Singapore dollar to choose from Option choices on the Singapore dollar: Call on S$ Put on S$ Strike price (US$/Singapore dollar) $1.322 $1.37 Premium (US$/Singapore dollar) $0.047 $0.006 Samuel decides to buy call options in Singapore dollars. What will be Samuel's profit/loss if the ending spot rate is $1.320/S$ in 90 days? Keep all decimal places.
Samuel Samosir works for Peregrine Investments in Jakarta, Indonesia. He focuses his time and attention on the U.S. dollar/Singapore dollar ($/S$) cross-rate. The current spot rate is $1.39/S$. After considerable study, he has concluded that the Singapore dollar will appreciate versus the U.S. dollar in the coming 90 days, probably to about $1.44/S$. He is considering trading options to profit and has the following options on the Singapore dollar to choose from: Option choices on the Singapore dollar: Strike price (US$/Singapore dollar) Premium (US$/Singapore dollar) Call on S$ $1.35 $0.047 Put on S$ $1.589 $0.006 Samuel decides to sell one put option in Singapore dollars. What will be Samuel's profit/loss if the ending spot rate is $1.314/S$ in 90 days? Keep all decimal places.
Suppose you are a U.S. investor who is planning to invest $805,000 in Mexico. Your Mexican investment gains 10.2 percent. If the exchange rate moves from 12.4 pesos per dollar to 12.7 pesos per dollar over the period, what is your total return on this investment? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Total return 4
H3. The Central Bank of the Bahamas pegs the Bahamian Dollar to the United States Dollar at a price of 1 BSD per USD. As an analyst for XYZ Consulting Inc., you have been asked to predict the behavior of key macroeconomic variables in the Bahamas for different policy scenarios. Using all the appropriate diagrams, your analysis must describe the Bahamian money and output markets, as well as the foreign exchange market. To perform this task, you must assume that prices are sticky: fixed in the short-run and flexible in the long-run. The scenarios are: a) A temporary restrictive monetary policy in the Bahamas. b) A temporary restrictive fiscal policy in the Bahamas.
A U.S. firm, sells merchandise today to a British company for £100,000. The current exchange rate is $1.38/£, the account is payable in three months, and the firm chooses to hedge by borrowing £98,765.43 today and exchanging the proceeds today for dollars; the loan will be paid back with the £100,000 accounts receivable (money market hedge). If Husky converted the borrowed pounds into dollars today and invested that amount at its WACC of 6% (1.5% for 90 days), how much much money in U.S. dollars will Husky Sporting Goods Company have in 90 days?
Suppose you are the treasurer of a U.S. multinational firm that wants to hedge the foreign exchange risk associated with your firm's sale of equipment to a Swiss firm worth CHF1,000,000. The receivable is due in six months. You want to ensure that Swiss francs are worth at least $0.70 when the francs are received so you want a strike price of $0.70. How many options contracts do you need to hedge this risk? Do you want a call or put on Swiss francs? When will you exercise the options? When will you let the options expire?
Hello Can you assist with problem 3b. Then assist with question 5. Question 3b is needed to answer question 5
HSBC (a large British bank) is quoting the following spot exchange rates for number of YEN per USD, number of THB per USD and number of YEN per THB respectively. YEN/USD = 116.91 -- 116.95 THB/USD = 44.30 -- 44.40 YEN/THB = 2.6900 -- 2.7100. You are trader at Wombat Capital, a US hedge fund, and your job is to try to find arbitrages in the currency markets. You have 10 mio USD risk capital provided by your fund. Using the 10 mio USD risk capital, how much arbitrage (guaranteed risk-free) profit can you make. If there is no arbitrage possible, enter zero. Give your answer in USD to the nearest USD. Please Do your calculation in excel and do not round anything until the very end.

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