Is the swiss franc at a forward premium or discount

Assignment Help Financial Management
Reference no: EM131213541

The following rates are available in the markets: Current spot exchange rate: $1.000/SFr Current 30-day forward exchange rate: $1.010/SFr Annualized interest rate on 30-day dollar-denominated bonds: 12% (1.0% for 30 days) Annualized interest rate on 30-day Swiss franc-denominated bonds: 6% (0.5% for 30 day

a. Is the Swiss franc at a forward premium or discount?

b. Should a U.S.-based investor make a covered investment in Swiss franc-denominated 30-day bonds, rather than investing in 30-day dollar-denominated bonds? Explain.

c. Because of covered interest arbitrage, what pressures are placed on the various rates? If the only rate that actually changes is the forward exchange rate, to what value will it be driven?

Reference no: EM131213541

Questions Cloud

Emerging technologies in the professional environment : What are the benefits of emerging technologies in the professional environment? How might an organization use technology to promote its branding, products and services?
Extend the transaction manager to use read and write locks : A cell can either be locked with exactly one write lock or with any number of read locks. For this exercise, extend the transaction manager to use read and write locks.
Mobile data secure for customers : How do companies keep mobile data secure for customers? How do companies use technology to create competitive advantage?
Design a database for the scenario : CSG1207 - CSI5135 Systems and Database Design - Your first task is to design a database for the scenario detailed on the following pages. Your final database design should comprise of approximately 10 entities.
Is the swiss franc at a forward premium or discount : Should a U.S.-based investor make a covered investment in Swiss franc-denominated 30-day bonds, rather than investing in 30-day dollar-denominated bonds? Explain.
What role do women in science play today : Discuss how the methods of experimentation and observation have changed throughout the history of science. Explain the role so called "accidental" discoveries played in the history of science.
Optimize the get lock and save state protocols : It is clear that they are only really needed the first time. For this exercise, optimize the get lock and save state protocols so they use the least possible number of messages.
Examples of the different taxbases : Explain the meaning of "tax base" and give THREE examples of the different taxbases regularly used by governments.
Analyze current policy challenges in emergency management : Based on your EOP, analyze current policy challenges and opportunities in emergency management. Critique how a historical analysis of disasters within a community may influence an emergency preparedness plan.

Reviews

Write a Review

Financial Management Questions & Answers

  Prepared to make equal annual deposits into the account

You want to have $78,000 in your savings account 12 years from now, and you’re prepared to make equal annual deposits into the account at the end of each year. If the account pays 6.80 percent interest, what amount must you deposit each year?

  Estimate present value of the tax benefits from depreciation

Your company is considering a new project that will require $767,000 of new equipment at the start of the project. The equipment will have a depreciable life of 8 years and will be depreciated to a book value of $143,000 using straight-line depreciat..

  Capital asset pricing model-appropriate expected rates

(Capital Asset Pricing Model) The expected return for the general market is 11.0 percent, and the risk premium in the market is 6.4 percent. Tasaco, LBM, and Exxos have betas of 0.831, 0.696, and 0.576, respectively. What are the appropriate expected..

  Expects future economic development in the community

A land broker has indicated that she expects future economic development in the community where the land is located to lead to substantial appreciation in the land’s value over the next decade. The cost of the land is $200,000. What is the NPV and is..

  Define capital asset pricing model and define beta

(Calculating the rate of return) A friend promises to pay you $600 three years from now if you loan her $500 today. What interest rate is your friend offering you? (Calculating the future value of an annuity). Define the Capital Asset Pricing Model (..

  Why is the concept of the time value of money

Why is the concept of the time value of money important for companies when considering investing in assets & why is the concept of the time value of money important for companies when considering what type of debt instrument (bond) they should issue ..

  Regression equation of dependent variable

The R-square of a regression equation of a dependent variable (Y) and a set of independent variables represents: the % of total residuals of the forecasting model. the % movements in Y that can be explained by the forecasting model the % total error ..

  Calculate the effective annual return fund investors

A mutual fund has been advertising that, had you deposited $250 per months in the fund for the last 10 years, you would now have accumulated $85,000. Assuming that these deposits were made at the beginning of each month for a period of 120 months. Ca..

  Using current specifications-resurfacing a road will cost

Using the current specifications, resurfacing a road will cost $1.5M initially, need $120K in annual maintenance, and need to be resurfaced every 10 years. The resurfacing cost will be $2.1M with $90K in annual maintenance and resurfacing every 15 ye..

  Dividend discount model and discounted cash flow model

You have been asked to perform a stock valuation prior to the annual shareholders meeting next week. The two models you’ve selected to value the firm are 1) the dividend discount model and 2) the discounted cash flow model.

  Calculate the best-case and worst-case npv figures

We are evaluating a project that costs $924,000, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 75,000 units per year. Price per unit is $46, va..

  Federal reserve begins to raise interest rates

The U.S. Federal Reserve has kept interest rates at a very low level for the last 5 years. How do you think these low interest rates affect the price of U.S. stocks? What do you think will happen to the value of U.S. stocks when the U.S. Federal Rese..

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