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 $0.047 Put on S$ $1.343 $0.006 Samuel decides to sell put options on Singapore dollars. What will be Samuel's break-even spot rate (in direct format)? 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 $0.047 Put on S$ $1.343 $0.006 Samuel decides to sell put options on Singapore dollars. What will be Samuel's break-even spot rate (in direct format)? Keep all decimal places.

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 US dollar costs 1.30 Canadian dollar (CAD), but the same dollar can be purchased for 25.0 Mexican peso (MXN). If the MXN/CAD exchange rate is quoted as 18.0, there is an opportunity for triangular arbitrage. Starting from a dollar, the arbitrager will first buy (CAD MXN) with the dollar to obtain blanks and explain your answer." % of riskless arbitrage profit for each round. Fill in
You are an American investor who can borrow $1,000,000 or the equivalent amount in euros today. Suppose the spot rate is $1.18/€, and the one-year forward rate is $1.15/€. The annual interest rate is 4 percent in the U.S. and 2 percent in Germany. Check if IRP holds. If it does not hold, set up a covered interest arbitrage. What will be your profit from this arbitrage opportunity in dollars?
the current spot exchange rate is $1.85/£ and the three-month forward rate is $1.80/£. Based on your analysis of the exchange rate, you are pretty confident that the spot exchange rate will be $1.82/£ in three months, assume that you would like to buy or sell £1,000,000. a) what actions do you need to take to use these rates to earn a profit? what is the expected dollar profit from speculation? b) What would be your speculative profit in dollar terms if the spot exchange rate actually turns out to be $1.76/£
Suppose that you are the CFO of Google with an extra U.S. $20 Million to invest for one year. You are considering the purchase of U.S. T-bills that yield 4% per year. The spot exchange rate is $1.00 = €0.90, and the one-year forward rate is $1.00 = €0.95 . What must the interest rate in the Eurozone (on an investment of comparable risk) be before you are willing to consider investing there instead of the US? a. 9.78% b. 1.56% c. 4.00% d. 5.56%
Yize Shen at Sumatra Funds. Yize Chen trades currencies for Sumatra Funds in Jakarta. She focuses nearly all of her time and attention on the U.S. dollar (USD) to Singapore dollar (SGD) cross-rate. The current spot rate is USD 0.6000 = SGD 1.00. After considerable study, she has concluded that the Singapore dollar will appreciate versus the U.S. dollar in the coming 90 days, probably to about USD 0.7000 = SGD 1.00. She has the following options on the Singapore dollar to choose from: Should Yize buy a put on Singapore dollars or a call on Singapore dollars? What is Yize’s break-even price on the option purchased in part (a)? Using your answer from part (a), what are Yize’s gross profit and net profit (including premium) if the spot rate at the end of 90 days is indeed USD0.7000? Using your answer from part (a), what are Yize’s gross profit and net profit (including premium) if the spot rate at the end of 90 days is USD0.8000?
Alex is a currency speculator working for CIBC Currency funds in Toronto. He focuses nearly all of his time and attention on the U.S. dollar /Canadian dollar ($/C$) exchange rate. The current spot rate is $1.3546/C$. He believes that the Canadian dollar (C$) will appreciate versus the U.S. dollar over the coming 90 days. He can choose between the following options on Canadian dollar: Option Strike price Premium Put on C$ $1.400/C$ $0.00045/C$ Call on C$ $1.415/C$ $0.00048/C$ Should Alex buy a put option on Canadian dollars or a call option on Canadian dollars?
(Call Option P/L)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$ $1.36 $0.066 Put on S$ $1.37 $0.006 Samuel decides to buy call options in Singapore dollars. What is Samuel's (net) profit/loss (in dollars) per option if the spot rate is $1.37/S$ at maturity? Keep the sign and all decimal places. Do not include currency sign in your answer.
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$ $1.371 $0.047 Put on S$ $1.37 $0.006 Samuel decides to buy call options in Singapore dollars. What will be Samuel's profit/loss if the ending spot rate is $1.286/S$ in 90 days? Keep all decimal places.
A company is considering an investment project in Canada which has an initial cost of CAD5,785,000. The project is expected to return a one-time payment of CAD7,430,000 two years from now. The risk-free rate of return is 1.6 percent in the U.S. and 1.9 percent in Canada. The inflation rate is 1.5 percent in the U.S. and 1.8 percent in Canada. Currently, you can buy CAD 124.20 for $100. How much will the payment two years from now be worth in U.S. dollars? $5,917,265 $5,956,317 $5,927,028 $5,946,554 $5,936,791
Samuel works for Peregrine Investments Indonesia. He focuses his time and attention on the U.S. dollar/Singapore dollar ($/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) $1.35 $1.45 Premium (US$/Singapore dollar) $0.047 $0.065 Samuel decides to sell put options on Singapore dollars. What is Samuel's break-even spot rate at maturity?
Samuel Samosir works for Peregrine Investments in Jakarta, Indonesia. He focuses his time and attention on the U.S. dollar/Singapore dollar ($/S$) cross-rate. The current spot rate is $1.39/S$. After considerable study, he has concluded that the Singapore dollar will depreciate versus the U.S. dollar in the coming 90 days, probably to about $1.35/S$. 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) $1.50 $1.37 Premium (US$/Singapore dollar) $0.064 $0.006 Samuel decides to sell call options in Singapore dollars. What is Samuel's (net) profit/loss (in dollars) per option if the spot rate is $1.54/S$ at maturity?
In June 2010, an investor is considering investing in bank deposits in Korea and Japan. Theannual interest rate on Korean deposits is 6.25%, versus 3.75% on deposits in Japan. Supposethat the forward rate (for June 2011) in June 2010 is equal to F(won/yen) = 8.2. In June 2010, theexpected exchange rate is 8.2 won/¥. For the remainder of this question, use the linearapproximations for uncovered and covered interest rate parity. The spot exchange rate in June2010 is E(won/yen) = 8 a. Does covered interest parity hold in this example?b. Does uncovered interest parity hold in this example?c. Suppose the exchange rate in June 2011 is equal to 7.472 won per yen. Calculate theinvestor’s actual return, assuming that he invests in Japanese deposits in June 2010.How do these answers compare with those from (b)?d. Consider two investors: one uses speculation and the other uses hedging. Based on yourprevious answers, which one earned a higher return (or smaller loss) on Japanese assetsbetween June…

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