Current spot exchange rate

Assignment Help Finance Basics
Reference no: EM133112030

Based on the rate quoted, United States is now giving the annual interest rate of 6.5% and United Kingdom is quoted 8.5%. The spot exchange rate is $1.87/£ and the forward exchange rate, with one-year maturity, is $1.84/ £ . Assume that the arbitrager can borrow up to $1,000,000 or £534,759, which is the equivalent to $1,000,000 at the current spot exchange rate. Will the arbitrager be making a profit or suffering from a lost?

Reference no: EM133112030

Questions Cloud

What is the total costs of by products : Desired profit on C and D (P2,000 and P1,500). If the joint costs are allocated to by-products using the reversal cost method, what is total costs of by product
Project discounted payback period : You have just started your new position as a finance manager is Visible Inc. Your colleague presents you with the following cash flows of a proposed project (al
Record the transactions on the t-account worksheet : Received $940 in bills for electricity, water and telephone, to be paid next month. Record the transactions on the T-Account worksheet
Find the cost of capital for the company : As the first task in your finance internship, you have been asked to find the cost of capital (WACC) for a company. The company has two main sources of capital
Current spot exchange rate : Based on the rate quoted, United States is now giving the annual interest rate of 6.5% and United Kingdom is quoted 8.5%. The spot exchange rate is $1.87/£ and
Determine the minden co earnings per share : A dividend of $10,000 was paid to the common shareholders. There are 1,000 shares in the issue. Determine the Minden Co.'s earnings per share
What is the current value of a put option : What is the current value of a put option with an exercise price of $30? The six-month risk-free interest rate is 5%.
What is the amount of the initial payment : A city is initiating a sinking fund for development of a new landfill which will be constructed in exactly 10 years.(single payment 10 years from today).
Create a financial plan for a college student : Create a financial plan for a College student/student just leaving college please include the following:

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the main reason george soros

What is the main reason George Soros successfully shorted british pound in 1992? Would it happen again today?

  The implied interest rate can be uniquely determined

1. Determine if the implied interest rate can be uniquely determined if you know volatility; consider the derivative dC/dr 3. Assume that the volatility is 10%/year

  What is the firm cost of retained earnings

A firm's common stock is selling for $85 in the market. The dividend yield is 6%. The company's constant growth rate is 7%. The firm's tax rate is 40%. What is the firm's cost of retained earnings?

  A currency trader observe

A currency trader observes that in the spot exchange market

  What is the company average accounts receivable balance

Barney's Antique Shop has annual credit sales of $1,080,000 and an average collection period of 40 days. Assume a 360-day year.

  Analyze the market potential of the new project

Specific Foods (SF) is considering undertaking an expansion of its existing operations to produce a new product. The new project is in the same line of business

  Calculate the expected net income

Annual expenses are expected to be: labor of $50,000; $30,000 in rent; $10,000 in equipment depreciation. The tax rate is 35%. Calculate the expected Net Income.

  How margin accounts protect investors against credit risk

QUESTION 1: PLEASE critically discuss how margin accounts protect investors against credit risk.

  What is the required rate of return for twynam corp

Twynam Corp. has a beta of 1.3. The market risk premium is 8% and the risk-free rate is 3%. What is the required rate of return for Twynam Corp?

  How much is the principal loan balance reduced

How much is the principal loan balance reduced by during the first year? What is the current value of your settlement? What should be the lease payments?

  Compute the proceeds from each of the three notes

An eight-year note with an annual stated rate of 8 percent and a face value of $35,000. Interest is paid annually on December 31. The effective interest rate is 10 percent.

  How much does the firm have in net fixed assets

How much does the firm have in net fixed assets (i.e., total assets - current assets)?

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