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As the money manager of Boston Bank you have $1,000,000 available for six months. You have the opportunity to lend the fund in U.S. or lend the fund to prospective customers in Montreal or Landon.
Use the following information to answer this problem: (45Points)
- Present spot rate: $1.7120/ $0.8861/C$
- Six month forward rate: $1.6726/ $0.8742/C$
- Interest rate in U.S. is 8.00% annual- Interest rate in U.K. is 10.5%- Interest rate in Canada is 9.5%
a. Are interest rates and forward rates in equilibrium? Why or why not? Show your work.b. Where should you invest for maximum yield?c. What forward rate would create an equilibrium situation associated with investing in U.S. or Canada?d. Would your decision about where to invest change if the U.K. interest rate was 15%?e. If there is an arbitrage opportunity, for a transaction size of U.S. $1,000,000, (or 1,000,000) that you can borrow, how can you take advantage of the situation without taking undue risks? Show your work and profit or losses.
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Horizontal and vertical analysis of the Balance Sheets for the past three years and Horizontal and vertical analysis of the Income Statements for the past three years.
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An FX dealer quotes the spot exchange USDJPY spot exchange rate as 85.887-85.905. Two buyside counterparties agree to transact at these quotes: One buys one billion JPY and the other sells one billion JPY. What is the dealers profit from these tra..
Quantitative vs tarditional fundamental analysis Would you propose that the acquisition or merger target have a high or low equity value-to-earnings multiple
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Assume a company makes the policy changes listed below. If a change means that external, nonspontaneous financial requirements will increase.
A farmer has an contract for a fixed price of a product that is being sold in interstate commerce for a competitive value. Is this legal?
Examine Sids investment objectives in view of what you know about his financial situation and identify any inconsistencies between his stated objectives and his plans.
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