Investor carrying covered interest arbitrage

Assignment Help Financial Management
Reference no: EM131558549

Suppose interest rates are 2% and 4% in US and Germany respectively. The spot rate is $1.3/Euro and the forward rate is $1.2/Euro

a) What is the yield to the US investor carrying covered interest arbitrage in Germany?

b) Calculate the arbitrage profit/loss to the US investor who borrows $1,000 for this strategy?

(show work)

Reference no: EM131558549

Questions Cloud

What is the book value of the? equipment : What is the book value of the? equipment? If Jones sells the equipment today for $179,000 and its tax rate is 35%?, what is after-tax cash flow from selling it?
What must beta of this stock be : A stock has an expected return of 12.6 percent, the risk-free rate is 7 percent, and the market risk premium is 10 percent. What must the beta of this stock be?
What is portfolio beta : What is the portfolio beta?
What must the expected return on stock : A stock has a beta of 1.04, the expected return on the market is 10 percent and risk-free rate is 3.5 percent. What must the expected return on this stock be.
Investor carrying covered interest arbitrage : What is the yield to the US investor carrying covered interest arbitrage in Germany?
What is length of the cash cycle : A firm has an accounts payable period of 46 days, an inventory period of 56 days, What is the length of the cash cycle?
What are the portfolio weights for a portfolio : What are the portfolio weights for a portfolio that has 144 shares of Stock A that sell for $40 per share and 100 shares of Stock B that sell for $20 per share?
What is the company pretax cost of debt : If the tax rate is 33 percent, what is the aftertax cost of debt? What is the company's pretax cost of debt?
Equilibrium with required return equal to expected return : what is the value of the stock today (assume the market is in equilibrium with the required return equal to the expected return)?

Reviews

Write a Review

Financial Management Questions & Answers

  Originally a defence alliance

Which of the following was originally a defence alliance?

  What is the firm net float

ABC Company writes 388 checks a day for an average amount of $489 each. These checks generally clear the bank in 3 days. In addition, the firm generally receives an average of $199,187 a day in checks that are deposited immediately. Deposited funds a..

  Estimate FCFE for the firm each year for next three years

NanoSoft is a software firm that has never paid a dividend before but its boards of directors is considering whether to initiate dividends and if so, how much to pay. The non-cash working capital is currently 20% of revenues and this ratio is expecte..

  Each of the next four years to expend the entire budget

what uniform annual amount should the company spend in each of the next 4 years to expend the entire budget

  Considering an investment

Helen is considering an investment of $3,500 each year for 18 years, starting at the end of the this year. The investment will pay 5 % interest. How much will this investment ($) be worth at the end of the 12 years?

  Operating leverage-slow-growth company to have debt ratio

What is operating leverage? How, if at all, is it similar to financialleverage? If a firm has high operating leverage would you expect it tohave high or low financial leverage? Explain your reasoning. Why might it make sense for a mature, slow-growth..

  What is the firms weighted cost of capital

Tinker bell has a capital structure of $60,000 in debt and $140,000 in equity. What is the firm's weighted cost of capital if the marginal pretax cost of debt is 12 percent, the firm's average pretax cost of debt outstanding is 8%, and the cost of eq..

  Prepare in good form income statement for virginia slim wear

Prepare in good form an income statement for Virginia Slim Wear. Take your calculations all the way to computing earnings per share.

  Effects of errors in inventory valuation

Show the effect, if any, of each of the following errors on ending inventory, cost of goods sold, gross profit on sales, and net income by placing the appropriate symbol in each column. In use is the periodic inventory system. Use the following symbo..

  What price do you expect mf shares to sell for in three year

MF Corp. has an ROE of 16% and a plowback ratio of 25%. If the coming year's earnings are expected to be $4 per share, at what price will the stock sell? The market capitalization rate is 12%. What price do you expect MF shares to sell for in three y..

  Uses of comparative data in healthcare organizations

Discuss the four uses of comparative data in healthcare organizations and provide an example when each may be useful. How might you personally use comparative data to improve your performance in your organization? Will the internet result in disinter..

  What is your debit and equity balance

You bought 200 shares of XYZ stocks on 65% margin on 1/24/2012. XYZ was trading at $30 a share at the time you opened your margin account. The margin loan is for 6 months and carries an annual 5% interest rate. The maintenance margin is 50%. What is ..

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