Suppose that you know the following(i)yield 6% per annum(ii)New Zealand 3 month Treasury billsUŠ 3 month Treasury bills yield 8% perannumthe spot exchange rate is NZ$1 =US$0.75(iv)$1 = US$0.77The return to investing NZ$1 in the US for 3months is NZ$.and include the original $1 invested in thevalue of the return)(ii)the 3 month forward exchange rate is%3D(Answer: use 3 d.p.

International Investment refers to funds flow among investors and investee belonging to two…

Answered: Suppose that you know the following (i)…

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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Similar questions

Suppose exchange rates are: EUR/AUD = 1.5550 GBP/AUD = 2.8923 GBP/EUR = 1.8600 Starting with 10,000 AUD, what are the one-round-trip arbitrage profits rounded to the nearest AUD? 14,180 AUD No arbitrage profit is possible. 1,961 AUD 73,654 AUD
Assume the following information: Current spot rate of New Zealand dollar = $.41 Forecasted spot rate of New Zealand dollar six months from now = $.43 Six month forward rate of the New Zealand dollar = $.44 Six month interest rate on New Zealand dollars (annual rate) = 8% Six month interest rate on U.S. dollars (annual rate) = 9% What are the potential profits in USD or NZD from interest rate arbitrage if you can start with 1,000,000 USD or 1,000,000 NZD? a. 13.27% b. 5.87% c. 58340.20 NZD d. $115,271
A selected bundle of goods costs £100 in the UK, and a similar bundle costs 1,200 krona (DKR) in Denmark. People generally expect the rate of inflation to be 5 per cent in the UK and 3 per cent in Denmark. (a) Assuming that PPP applies, what is the current exchange between GBP and DKR? (b) Assuming that PPP will continue to hold, what spot exchange rate would you predict for 12 months hence? (c) Again assuming PPP, what exchange rate should be quoted for three-month forward transactions?
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
The nominal exchange rate between the Australian Dollar and the Euro in equilibrium is 0.5(1 AUD buys 0.5 Euros) and both countries' interest rates are currently at 2% per annum. The interest rate in Australia is raised to 4% per annum for 2 years, after which it returns to 2% per annum. calculate the exchange rate at the time when the interest rate is raised? Use a graph to show the exchange rate over time.
Foreign exchange investment involves risks and at the same time returns. Considering you will invest your peso @ P50 = $1 foreign exchange with a fixed interest of 5%, when can you say that you are fully maximized the value of your investment upon maturity? a. Interest and proceeds received in full deposit to a bank account b. Interest received in full with current exchange rate @ P52 = $1 but retained the money in USD while waiting for another investment. c. Interest received in full with current exchange rate @ 52 = $1 and converted the full proceeds to peso d. Interest received in full with current exchange rate @ 52 = $1 but converted the interest only while waiting for another investment.
Mr liam want to invest Us$700,000 on mexico. interest rate per year inflation rate per year US 1.49% 1.27% Mexico 6.47% 3.38% Nominal Exchange Rates -Spot 19.780 Pesos=US $1-One-year forward 19.790 Pesos=US $1 The future spot exchange rate(St) is 19.650 Pesos=US $1. Calculate the arbitrage portfolio and assess how to construct the arbitrage portfolio based on the calculations.
Assume the following information: Current spot rate of Australian dollar = $.64 Forecasted spot rate of Australian dollar 1 year from now = $.59 1-year forward rate of Australian dollar = $.62 Annual interest rate for Australian dollar deposit = 9% Annual interest rate in the United States = 6% Use the above information to show the gain a trader could have from covered interest arbitrage
Suppose that the current EUR/GBP rate is 0.6668 and the one-year forward exchange rate is 0.6742. The one-year interest rate is 1.8% in euros and 3.6% in pounds. You can borrow at most €1,000,000 or the equivalent pound amount. Suppose you are a pound-based investor. Determine the profit/loss (in GBP, no cents) if you borrow locally and invest in Euros.
The one-year interest rate in Australia is given as 0.5% and the one year interest rate in New Zealand is given as 1%. The spot rate of the New Zealand dollar is A$0.95. You will receive 10,000 New Zealand dollars in one year.(a) Using the international Fisher effect, calculate the expected change in the exchange rate for the New Zealand dollar.(b) Using your answer to (a), calculate the amount of Australian dollars you will receive when converting the New Zealand dollars to Australian dollars in one year at the spot rate at that time.
A Canadian supplier is offering two options to his American client to pay for an equipment: paying 13,000 Canadian dollars now or paying 10,000 US dollars in 6 months. If the annual interest rate for the Canadian dollar is 5% and for the US dollar is 8%, what is the "implied" exchange rate? Question 5 options: CAD0.7581/USD. CAD1.3520/USD. CAD0.7505/USD. CAD1.3190/USD. CAD1.3325/USD. CAD0.7396/USD.
The 1 year (lending or borrowing) rate in the UK is 8%; the 1 year (lending or borrowing) rate in the United States is 5%. Currently the spot exchange rate if $1.81 per British pound; the 1 year forward rate is $1.79 per British pound. If you are able to borrow $1,000,000 in the US to lend (as British pounds) in the UK, how much a risk free profit can you create over the next year? Give typing answer with explanation and conclusion

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