Compute the effective yield in dollar terms

Assignment Help Financial Management

Reference no: EM131176424

If you invest $6,000 in a Euro bond for 1 year paying 5% interest. At the time the investor bought the Euro bond, the exchange rate was $1.00 per Euro.

A) If 1 year later you convert the maturity value of the investment in Euro to US dollars, the exchange rate was $1.02 per Euro, compute the effective yield in US dollar terms.

B) If 1 year later you convert the maturity value of the investment in Euro to US dollars, the exchange rate was $0.95 per Euro, compute the efective yeild in US dollar terms.

Reference no: EM131176424

Questions Cloud

The fed will raise rates at the end : Assume your boss believes the cap is too expensive and is not convinced that the Fed will raise rates at the end of summer 2014. What can you do to reduce the premium, given the availability of the floor as described above? What position have you cre..

If the founders were to raise money by selling equity : Schwadin’s Shawarma Shops (S3 ) is a new restaurant chain in its early stages. The founders have great plans, but need to test their restaurant design, their recipes, and their franchising business model. They need $200,000 to outfit a first, small s..

Cash of prestopinos cash conversion cycle : Prestopino Corporation produces omtorcycle bateries. Prestopino turns out 1,500 batteries a day at a cost of $6 per battery for materials and labor. It takes the firm 22 days to convert raw mateials into a battery. What is the length of Prestopino's ..

Call option on euro and euro spot rate : ABC Corportion has 90-day receivables of Euro 500,000. The following info is available: A call option on Euro that expires in 90 days has an exercise price of $1.20 and has a premium of $0.03. A put option on Euro that expires in 90 days has an ecerc..

Compute the effective yield in dollar terms : If you invest $6,000 in a Euro bond for 1 year paying 5% interest. At the time the investor bought the Euro bond, the exchange rate was $1.00 per Euro. If 1 year later you convert the maturity value of the investment in Euro to US dollars, the exchan..

What is estimated annual after-tax cash flow for year four : A company with a 34% marginal income tax rate is considering an investment that is classified as 3-year property in the MACRS depreciation schedule. The investment has the estimated following benefits: What is the income tax owed in year 3? What is t..

Calculate the net present value-mirr and profitability index : The manager of PPO Inc. plans to manufacture engine blocks for classic cars from the 1960s. The revenue from the blocks will be $750,000 per year for each of the next 4 years. The equipment will cost $800,000 depreciated using a 3 year MACRS life. Wh..

What are the approximate real growth rates of GDP and wages : Assume the inflation rate in 2012 is 1.3 percent. If the nominal GDP grew 3.5 percent and nominal wages grew 2.6 percent, what are the approximate real growth rates of GDP and wages?

The price of two-year european call option : What, to the nearest cent, is the lower bound for the price of a two-year European call option on a stock when the stock price is $20, the strike price is $15, and the risk-free interest rate with continuous compounding is 5% and there are no dividen..

User Account

All Pages