Reference no: EM13751989
1. Assume that Bank X quotes the New Zealand dollar as NZD-USD.3301/51, while Bank Y quotes the New Zealand dollar as NZD-USD .3201/51.
a. Given this information, is it possible for investors to conduct arbitrage?
b. If an investor has a borrowing capacity of $10,000,000, how much profit can she make from the quote discrepancy?
c. What will be the impact of her transaction on the market quotes of the New Zealand dollar at the two banks?
2. Assume the following information:U.S. investors have $10,000,000 to invest
|
Lending and borrowing rate in U.S. dollars
|
=
|
6% and 8% respectively
|
|
Lending and Borrowing rate in Singapore dollars
|
=
|
4% and 6% respectively
|
|
Forward rate of Singapore dollars
|
=
|
$.412-$0.414
|
|
Spot rate of Singapore dollar
|
=
|
$.400 - $.402
|
(a) Explain any discrepancy an investor can spot in the situation?
(b) How much profit (if any) can be made by an investor who has a borrowing capacity of the equivalent of $10,000,000?
3. Assume the following information for a bank quoting on spot exchange rates:
|
Exchange rate of Singapore dollar in USD
|
=
|
$.60 - $0.61
|
|
Exchange rate of pound in USD
|
=
|
$1.51 - $1.515
|
|
Exchange rate of pound in Singapore dollars
|
=
|
S$2.605 - S$2.61
|
(a) Explain the process of triangular arbitrage.
(b) How much profit can be made by a speculator with a capacity of $10,000,000 from this situation? (c) As arbitrage takes place, what will be the impact on each currency vis-à-vis the others?
4. Assume the following information:
|
U.S. deposit rate for 1 year
|
=
|
4%
|
|
U.S. borrowing rate for 1 year
|
=
|
6%
|
|
Swiss deposit rate for 1 year
|
=
|
3%
|
|
Swiss borrowing rate for 1 year
|
=
|
5%
|
|
Swiss forward rate for 1 year
|
=
|
$.4000-$.4020
|
|
Swiss franc spot rate
|
=
|
$.3905-$0.3922
|
Also assume that a U.S. exporter denominates its Swiss exports in Swiss francs and expects to receive SF 600,000 in 1 year. Using the information above, should the exporter hedge her exports using a forward hedge or a money market hedge? Explain.
5. You are the treasurer of Arizona Corporation and must decide how to hedge (if at all) future receivables of 350,000 Australian dollars (A$) 180 days from now. Put options are available for a premium of $.02 per unit and an exercise price of $.50 per Australian dollar. Call options are available for a premium of $0.03 and an exercise price of $0.50. The forecasted spot rate of the Australian dollar in 180 days is:
|
Future Spot Rate
|
Probability
|
|
$.46
|
20%
|
|
$.48
|
30%
|
|
$.52
|
50%
|
The 90-day forward rate of the Australian dollar is $.50.
(a) What option strategy can Arizona use to hedge its receivables?
(b) What is the probability that the option will be exercised (assuming Arizona purchased it)?
(c) What will be the net receivables if the option is exercised?
(d) Is the option strategy better than a forward contract?
(e) Would leaving the receivables unhedged have been better than the hedging strategies?
|
Analyze meaning and value of governmental systems
: analyze the meaning, value, and apply the significance of these governmental systems to the creation of another. In addition, it will help develop a strong understanding of the various governmental systems.
|
|
Determine the standard time for this job
: The worker's time averaged 2.6 minute per cycle, and the worker was given a rating of 120 percent (machine rating is 100 percent). Midway through the study, the worker took a 10-minute rest break. Assuming an allowance factor of 17 percent of work..
|
|
What is the bond yield to maturity
: A. What is the bond's yield to maturity? B. What is the bond's current yield (Hint: Look in the book!)?
|
|
Recommendation to increase the site''s appeal to job seekers
: Use the Internet to explore the website of one (1) company that has an online application process. Next, critique the online application process and site design to determine whether it would encourage or discourage job seekers to apply. Suggest one (..
|
|
Explain any discrepancy an investor can spot
: (a) Explain any discrepancy an investor can spot in the situation? (b) How much profit (if any) can be made by an investor who has a borrowing capacity of the equivalent of $10,000,000?
|
|
Explain two renaissance paintings and renaissance sculptures
: Explain two Renaissance paintings, Renaissance sculptures and two Gothic Cathedrals. For each of the works of art, describe and compare attributes of the works by following the guidelines below to structure your essay.
|
|
Name and describe two safeguard utilized for system security
: Name and describe two safeguard utilized for system security and Explain why health IT privacy and security standards are important
|
|
E-commerce in healthcare
: You have been asked by the executive committee of your healthcare facility to write a report on the strategic implications of information technology for your firm in the next three years, E-commerce in healthcare
|
|
What is the overall reliability of the systern
: lf the backup computer must be tivated by a switch in the event that the first computer fails, and the switch has a reliability of .98, what is the overall reliability of the systern? Both the switch and the backup computer must function in oder f..
|