Calculate amount of potential riskless arbitrage profits

Assignment Help Finance Basics
Reference no: EM133113418

A foreign currency trader in Tokyo is exploring into opportunity to earn riskless profits. He can borrow and invest $5,000,000 or Yen equivalent. Use the information in the table below.

1. Describe in detail how the trader can earn riskless profits and calculate amount of potential riskless arbitrage profits that he can earn.

2. Assuming that all other things including current spot rate, dollar interest rate and yen interest rate remain unchanged, calculate 180-day forward rate (¥/$) which will not allow the trader to earn riskless profits any longer.

3.Assuming that all other things including current forward rate, dollar interest rate and yen interest rate remain unchanged, calculate current spot rate (¥/$) which will not allow the trader to earn riskless profits any longer.

Reference no: EM133113418

Questions Cloud

Bond for current market price : Three years ago you purchased a 12?% coupon bond that pays semiannual coupon payments for $977. What would be your bond equivalent yield if you sold the bond fo
What monthly payment is required to pay off : What monthly payment is required to pay off a $51,000 loan in six years if the interest rate on the loan is 6.0% compounded: (Do not round intermediate calculat
What is the cost of waste due to excess inventory : If the school receives actual sales orders for 840 shirts, what amount of profit will the school earn? What is the cost of waste due to excess inventory
Calculate the internal growth rate for the firm : Assume the following data: Calculate the internal growth rate for the firm
Calculate amount of potential riskless arbitrage profits : A foreign currency trader in Tokyo is exploring into opportunity to earn riskless profits. He can borrow and invest $5,000,000 or Yen equivalent. Use the inform
What is the IRR of an investment : Question - What is the IRR of an investment that requires an initial investment of 110,000 today and pays 15,400 in one year's time
What is the current share price of your stock : In two years. The company will pay a liquidating dividend of $62 per share. What is the current share price of your stock
How many years does it take for the account balance : If the account balance is greater than 200, the effective rate of discount is d = 6%. How many years does it take for the account balance to grow to 225
Explain effect of power and influence : Explain the effect of power and influence that leaders have on followers in the organization.

Reviews

Write a Review

Finance Basics Questions & Answers

  Determine the process capability

A turning process is in statistical control and the output is normally distributed, producing parts with a mean diameter = 30.020 mm and a standard deviation.

  What will its dividend payout ratio be

If the company follows the residual dividend model, how much income must it earn, and what will its dividend payout ratio be?

  Which security should the treasurer select

Suppose the federal tax rate is 25% and the state tax rate is 5%. Which security should the treasurer select, assuming the securities have equal default risks?

  Should your company purchase the dump truck

The operator costs $22.00 per hour. Using 1,000 billable hours per year determine the net present value for the purchase of the dump truck using a MARR of 18%. Should your company purchase the dump truck?

  Cost of capital

Now suppose the two projects are mutually exclusive and each has a cost of capital of 5%. In this case, which project (if any) should be accepted based on:

  You purchased a stock for 4710 over course of a yr you got

you purchased a stock for 47.10 over course of a yr you got 2.40 per share in dividends and inflation avged 3.4

  Develop a three- to four-page analysis excluding the title

develop a three- to four-page analysis excluding the title and reference pages on the projected return on investment

  What is the definition beta of a stock

What is the definition beta of a stock? Also what exactly is it a measure of?

  What is the duration of the instrument

A debt instrument pays $10M in the end of one year, $zero for the next 8 years and then $100M at the end of the 10th year. The market rate is 5%.

  What is a money market hedge and how is it constructed

What is a money market hedge? How is it constructed? Suppose you are the French representative of a company selling soap in Canada.

  What is the invoice price

You purchase a bond with a coupon rate of 7 percent, semiannual coupons, and a clean price of $1,011. If the next coupon payment is due in four months, what is the invoice price?

  Erin griff manager of the cal division of the n corp is

erin griff manager of the cal division of the n corp is trying to decide whether to launch a new model of blender

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd