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Assume that annual interest rates are 9% in the United States and 6% in Switzerland. A bank can borrow (by issuing CDs) or lend (by purchasing CDs) at these rates. The spot rate is $0.60/Sf.
(a) If the current 1Y FX forward rate is $0.64/Sf, does the interest rate parity (IRP) hold?
(b) Based on your answer in (a), design an arbitrage strategy to exploit the lack of IRP. Assuming an arbitrage position of $1 million, what are the profit and spread earned?
(c) If IRP holds, what should be the 1Y FX forward rate?
(d) If the current 1Y forward rate is $0.58/Sf instead, design an arbitrate strategy to exploit the lack of IRP. Assuming an arbitrage position of Sf 1 million, what are the profit and spread earned?
Genetic Insights Co. purchases an asset for $11,645. This asset qualifies as a seven-year recovery asset under MACRS. The seven-year fixed depreciation percentages for years 1, 2, 3, 4, 5, and 6 are 14.29%, 24.49%, 17.49%, 12.49%, 8.93%, and 8.93%, r..
Using excel spreadsheet calculate how your outstanding of how the loan changes over time for each option
what per visit price must be set for this service to break even? to earn an annual profit of
Brady Company has 65,000 shares of stock that each sell for $37. Suppose the company issues 8,000 shares of new stock at the following prices: $37, $23, and $16. What is the effect of each of the alternate offering prices on the existing price per sh..
The portfolio Alpha has an expected return of 18.50% and risk of 60%. The portfolio Gamma has an expected return of 11.75% and risk of 30%. The risk of market portfolio is 40%. Ms. Investor would like to create the portfolio Delta by utilizing the ri..
A buffer, consisting of H2PO4^1- and HPO4^2-, helps control the pH of physiological fluids. Many carbonated soft drinks also use this buffer system.
makes high quality ocean beach umbrellas in Pennsylvania and sells most of its product through on line ordering and shipping direct to customers in NJ.
Determine the future value of $1500 in twenty-five years with a market interest rate of 6%.
Why is it possible for a conventional mortgage payment to fluctuate over the life of the mortgage?
The Perfect Rose Co. has earnings of $1.55 per share. The benchmark PE for the company is 11. What stock price would you consider appropriate? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Stock pric..
Suppose an investment offers to quadruple your money in 12 months (don’t believe it). What rate of return per quarter are you being offered? (Round your answer to 2 decimal places. (e.g., 32.16))
In the face of disappointing earnings results and increasingly assertive institutional stockholders, Estimate the division’s value using the DCF approach.
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