Suppose a U.S. investor wishes to invest in a British firm currently selling for £20 per share. The investor has $8,000 to invest, and the current exchange rate is $2/£. Suppose now the investor also sells forward £4,000 at a forward exchange rate of $2.10/£. Required: a. Calculate the dollar-denominated returns for each scenario. (Round your percentage answers to 2 decimal places. Negative amounts should be indicated by a minus sign.) Price per Share (C) £ E £ 15 20 25 Exchange Rate Rate of Return (%) at Given Exchange Rate $1.80/E $2.00/ $2.20/ % % % % % % %

Suppose a U.S. investor wishes to invest in a British firm currently selling for £20 per share. The investor has $8,000 to invest, and the current exchange rate is $2/£. Suppose now the investor also sells forward £4,000 at a forward exchange rate of $2.10/£. Required: a. Calculate the dollar-denominated returns for each scenario. (Round your percentage answers to 2 decimal places. Negative amounts should be indicated by a minus sign.) Price per Share (C) £ E £ 15 20 25 Exchange Rate Rate of Return (%) at Given Exchange Rate $1.80/E $2.00/ $2.20/ % % % % % % %

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

See similar textbooks

Similar questions

What does “nonrecourse” financing mean?
Given: interest rates are 6% in the U.S. and 15% in the U.K. The spot exchange rate for British pounds is 1.27 $/£ and the 1-year forward rate is F1 - yr = 1.19 $/£. You wish to borrow dollars. a. How can you effectively (synthetically) borrow $100,000 for one year without using the U.S. money market? (List each transaction you would make including the amounts of each currency involved. You may use either continuous compounding or discrete compounding as long as you show your calculations.) b. What is the implied interest rate on your synthetic loan? c. Should you borrow directly or synthetically, and why? d. How could an arbitrageur make a risk-free profit?
D3)
Assume that you believe that purchasing power parity (PPP) holds. You are an Australian investor with 225,000 AUD to invest for the next year. The current exchange rate is AUD/EUR 0.62. The expected inflation in Germany is 1.3% while the expected inflation in Australia is 3.6%. Current interest rates in Germany are 0.5% and in Australia 4.1%. What is your expected yield on a German investment? 4.1% 5.9% O 0.5% 2.8% None of the other options are correct
The balance sheet for Shankland Corporation follows: 000'009 $ 000006 Current assets Long-term assets (net) Total assets Current liabilities Long-term liabilities Total liabilities Common stock and retained earnings 000 0000 000 00 000 009' 000 006 Total liabilities and stockholders' equity 000'00s Required Compute the following. (Round "Ratios" to 1 decimal place.) Working capital Current ratio Debt-to-assets ratio Debt-to-equity ratio
Suppose a U.S. investor wishes to invest in a British firm currently selling for £100 per share. The investor has $24,000 to invest, and the current exchange rate is $2/£. Consider three possible prices per share at £95, £100, and £105 after 1 year. Also, consider three possible exchange rates at $1.60/£, $2/£, and $2.40/£ 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. (Do not round intermediate calculations. Round your percentage answers to 2 decimal places.) .
Assume the bid rate of an Yen dollar is $ 1.8 while the ask rate is $ 3.5 at Arab Bank.Assume the bid rate of an Yen dollar is $3.4 while the ask rate is $5.7 at Palestine Bank. Given this information, what would be your gain if you use $8876.7 and execute locational arbitrage? =8876.713.5^ * 3.4b =8876.7/5.7^ * 3.5c =8876.7/3.4^ * 1.8d = 8876.7 /3.5^ * 5.7
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.
If the current exchange rate is $1.90/£, the one-year forward exchange rate is $2.06/£, and the interest rate on British government bills is 5% per year, what risk-free dollar-denominated return can be locked in by investing in the British bills? (Do not round intermediate calculations. Round your percentage answer to 2 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
Suppose the U.S. yield curve is flat at 5% and the euro yield curve is flat at 3%. The current exchange rate is $1.25 per euro. What cash flows will be exchanged on a 4-year foreign exchange swap with notional principal of 260 million euros (or equivalently, at current exchange rates, $325 million)? Note: Do not round intermediate calculations. Enter your answer in dollars not millions rounded to the nearest dollar value. Swap rate ......... per year
Suppose that 1 Danish krone could be purchased in the foreign exchange market today for $0.17. If the krone appreciated 7% tomorrow against the dollar, how many krones would a dollar buy tomorrow? Do not round intermediate calculations. Round your answer to four decimal places. ____ krones

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS