Q 6. An Investor has €20000 and faces an interest of 5% in the Euro Zone or he could his Euro for pound sterling at the spot exchange rate and invest in UK market which gives interest of 15% The following are currency exchange rates £1.00=$1.50 and €1.00==$1.20 which makes the spot cross rate €1.25=£1.00 Find out a) the IRP forward rate of £ vs € and b) how much he will earn extra if invested in UK market?
Q 6. An Investor has €20000 and faces an interest of 5% in the Euro Zone or he could his Euro for pound sterling at the spot exchange rate and invest in UK market which gives interest of 15% The following are currency exchange rates £1.00=$1.50 and €1.00==$1.20 which makes the spot cross rate €1.25=£1.00 Find out a) the IRP forward rate of £ vs € and b) how much he will earn extra if invested in UK market?
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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Q 6. An Investor has €20000 and faces an interest of 5% in the Euro Zone or he could his Euro for pound sterling at the spot exchange rate and invest in UK market which gives interest of 15% The following are currency exchange rates £1.00=$1.50 and €1.00==$1.20 which makes the spot cross rate €1.25=£1.00
Find out
a) the IRP forward rate of £ vs € and
b) how much he will earn extra if invested in UK market?
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