The treasurer of a major U.S. firm has $22 million to invest for three months. The interest rate in the United States is .22 percent per month. The interest rate in Great Britain is .27 percent per month. The spot exchange rate is £.622, and the three-month forward rate is £.624. Ignore transaction costs. What would be the value of the investment in three months if the money is invested in the U.S. or if it is invested in Great Britain? (Do not round intermediate calculations and enter your answers in dollars, not in millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) U.S. Great Britain

The treasurer of a major U.S. firm has $22 million to invest for three months. The interest rate in the United States is .22 percent per month. The interest rate in Great Britain is .27 percent per month. The spot exchange rate is £.622, and the three-month forward rate is £.624. Ignore transaction costs. What would be the value of the investment in three months if the money is invested in the U.S. or if it is invested in Great Britain? (Do not round intermediate calculations and enter your answers in dollars, not in millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) U.S. Great Britain

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter20: Short-term Financing

Section: Chapter Questions

Problem 3BIC

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Concept explainers

International Bonds

A bond is fixed-income security where a lender comes into a contract with the borrower. The borrower agrees to make payment and interest at a specified date in the future or on maturity period. It is a type of financing that helps to fulfill and meet obligations. Many people invest in bonds because it is a simple form of security.

Question

The treasurer of a major U.S. firm has $22 million to invest for three months. The interest
rate in the United States is .22 percent per month. The interest rate in Great Britain is .27
percent per month. The spot exchange rate is £.622, and the three-month forward rate is
£.624. Ignore transaction costs. What would be the value of the investment in three
months if the money is invested in the U.S. or if it is invested in Great Britain? (Do not
round intermediate calculations and enter your answers in dollars, not in millions of
dollars, rounded to 2 decimal places, e.g., 1,234,567.89.)
U.S.
Great Britain

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