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1. A currency dealer has good credit and can borrow either $1,000,000 or €800,000 for one year. The one-year inflation rate in the U.S. is π$ = 2.5% and in the euro zone the one-year inflation rate is π€ = 5.5%. The one-year forward exchange rate is $1.20 = €1.00; what must the spot rate be to eliminate arbitrage opportunities? $1.1547 = €1.00 $1.2351 = €1.00 $1.2471 = €1.00 $1.0200 = €1.00
2. Suppose the futures price is below the price predicted by CIP. What steps would be necessary to follow in order to assure an arbitrage profit?
Go long in the spot market, go short in the futures contract.
Go long in the spot market, go long in the futures contract.
Go short in the spot market, go long in the futures contract.
Go short in the spot market, go short in the futures contract.
The City of Sinasonville operated a motor pool fund as an internal service fund. A loan of $500,000 was made from an enterprise fund, to be repaid over 10 years with no interest. Capital assets were purchased as follows: A budget is prepared to break..
What is the implicit borrowing rate being paid by customers who choose to defer payment for the month?
You bought one of Great White Shark Repellant Co.’s 8 percent coupon bonds one year ago for $1,030. These bonds make annual payments and mature 14 years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 7..
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Ryan Inc is expected to have its growth rate drop from 20% to 10% in 5 years. The last dividend was $3 and the discount rate is based on beta of 3, T bond rate of 5% and return of the market of 10%. First, find the value of Ryan Inc. Second, compute ..
Cybrcoin is circulated in the market. Will the Cybrcoin become the major international transaction currency?
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