How you use forward contracts to profit in above situation

Assignment Help Project Management

Reference no: EM131278467

Suppose today's exchange rate is $1.55/€. The six-month interest rates on dollars and euros are 6% and 3%, respectively. The six-month forward rate is $1.5478. A foreign exchange advisory service has predicted that the euro will appreciate to $1.5790 within six months.

a. How would you use forward contracts to profit in the above situation?

b. How would you use money market instruments (borrowing and lending) to profit?

c. Which alternatives (forward contracts or money market instruments) would you prefer? Why?

Reference no: EM131278467

Questions Cloud

Provide direction for your discussion of servant leadership : For this assignment, locate sources that provide a direction for your discussion of servant leadership, ethics, and entrepreneurism as they relate to your efforts to promote the greater social good in your career.

What is the average waiting time for a customer in system : At the bank teller's window, arrivals and service times are randomly distributed (inter-arrival times and service times have exponential distributions). There is only one teller at the window. If the arrival rate is 'x' customers per hour, and the se..

Roosevelt contribution to labor-management : In The book (Labor Relations Striking a Balance 4th edition, John W. Budd) I need Theory and Concept from the book to Franklin D. Roosevelt contribution to labor-management.

Create the most complete competitve landscape possible : What are some ways that organizations gather competitive analytical data and how can companies create the most complete competitve landscape possible? (answer in your own words)

How you use forward contracts to profit in above situation : How would you use forward contracts to profit in the above situation?- How would you use money market instruments (borrowing and lending) to profit?

What are some of the problems children face : What are some of the problems children face when they grow up in poverty? Specifically, discuss the impact of poverty on the health, nutrition, and safety of children.

What is the expected gain and loss in hiring the cpa : Mr. Smith has an income of $50,000. His calculations show that he owes $4,200 in taxes. He could hire a CPA for $400 to review the taxes. There is a 20% chance that the CPA could reduce taxes to $2,500, a 50% chance that taxes are reduced to $3,600, ..

Depending on the person and values : The answer to this question will vary depending on the person and his or her values and background. Some students are more focused on day-to-day personal needs and others on broader societal or global concerns. In general, most students would pref..

Formulate an hr strategic plan that will support dean blake : Formulate an HR strategic plan that will support Dean Blake's new organizational strategy. Your plan will make recommendations for HR activities in the areas of staffing, performance management

User Account

All Pages