While you were visiting London, you purchased a Jaguar for £35,000, payable in three months. You have enough cash at your bank in New York City, which pays 0.22% interest per month, compounding monthly, to pay for the car. Currently, the GBP/USD is 1.4580 and the three-month forward is 1.4255. In London, the money market interest rate is 2.5% for a three-month investment. You are studying the following payment method (a) Keep the funds at your bank in the U.S. and buy £35,000 forward. How much would it cost you in USD? (no cents)
While you were visiting London, you purchased a Jaguar for £35,000, payable in three months. You have enough cash at your bank in New York City, which pays 0.22% interest per month, compounding monthly, to pay for the car. Currently, the GBP/USD is 1.4580 and the three-month forward is 1.4255. In London, the money market interest rate is 2.5% for a three-month investment. You are studying the following payment method (a) Keep the funds at your bank in the U.S. and buy £35,000 forward. How much would it cost you in USD? (no cents)
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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While you were visiting London, you purchased a Jaguar for £35,000, payable in three months. You have enough cash at your bank in New York City, which pays 0.22% interest per month, compounding monthly, to pay for the car. Currently, the GBP/USD is 1.4580 and the three-month forward is 1.4255. In London, the money market interest rate is 2.5% for a three-month investment. You are studying the following payment method
(a) Keep the funds at your bank in the U.S. and buy £35,000 forward.
How much would it cost you in USD? (no cents)
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