Calculate the break-even number of forward points

Assignment Help Financial Management

Reference no: EM132030797

An investor is planning to borrow 1 million U.S. dollars at an annual interest rate of 3.512%, and invest in Argentine peso at an annual interest rate of 24.28% for one year. The current exchange rate is USDARS 20.31. The investor is also planning to buy a one-year U.S. dollars forward contract for Argentine peso, which is currently quoted at 4.2312 forward points. (One forward point is one point.)

a. Calculate the return of this investment.

b. Calculate the break-even number of forward points of the one-year U.S. dollar-Argentine peso forward contract, i.e. the number of forward points that makes the return (or profit) of this investment zero.

c. Calculate the break-even annual borrowing interest rate in the U.S. dollar, i.e. the U.S. dollar interest rate that makes the return (or profit) of this investment zero.

d. Calculate the break-even annual lending interest rate in the Argentine peso, i.e. the Argentine peso interest rate that makes the return (or profit) of this investment zero.

Reference no: EM132030797

Questions Cloud

Test the solubility of benzyl alcohol : Test the solubility of benzyl alcohol (also repeat separately with your unknown) and of phenol in 1 M (or 2 M) sodium hydroxide

What were the goals of your provocation : What were the goals of your provocation? What materials did you display? How did the children use the materials?

Choosing the most basic atom : When choosing the most 'basic atom', or the atom that is protonated first, I find it extremely difficult to decide what has priority over

Discuss about the early american education system : Which of the three founders of the early American education system discussed in the readings for this week (Mann, Hughes, Rush) would you want serving.

Calculate the break-even number of forward points : Calculate the break-even number of forward points of the one-year U.S. dollar-Argentine peso forward contract,

What are opinions about the origins of the opioid epidemic : Listen to the podcast. What are your opinions about the origins of the opioid epidemic in America? How should we address this issue as a nation?

What is the molarity : If the titration require 18.41 mL of the oxalic acid solution, what is the molarity.

Bottom flask of a simple distillation setup : Question 1: Of the following, which is not required to properly use a round bottom flask of a simple distillation setup?

Describe the accommodation : First, define the difference between an accommodation and modification (they are different) in education.

User Account

All Pages