What are the returns on funds invested for bill

Assignment Help Financial Management

Reference no: EM131910377

You are given the following information: U.S. France Japan Nominal one year interest rate 5% 6% 7% Spot rate ----- $1.16 $0.008 Interest rate parity exists between the U.S. and France as well as the U.S. and Japan. The international Fisher effect exists between the U.S. and France as well as the U.S. and Japan. Bill (based in the U.S.) invests in a one-year CD (certificate of deposit) in France and sells euros one year forward to cover his position. Erica (based in France) invests in a one-year CD in Japan and does not cover her position. What are the returns on funds invested for Bill and Erica respectively? Please justify your explanation both in terms of theory and calculations. (Hint: You can get the exchange rate between euro and Japanese Yen from their respective rate to USD)

Reference no: EM131910377

Questions Cloud

Why you chose the organization as the basis of your paper : Explain why you chose the organization as the basis of your paper. Include minimum of two authoritative references using in-text citations and a reference list.

Create a financial plan for a non profit organization : Non- Profit organization will provide small $4,000 to $6,000 (depending on eligibility) loans to adults, preferably parents who doesn't have a vehicle.

Company which uses put option to hedge : Forecasr the USD received by A&M company which uses the put option to hedge against its 3 month receivables of C$ 100,000.

Write a business memo responding to ceo of a global company : After decades of work (and the investment of hundreds of millions of dollars), your scientists have come up with a major breakthrough.

What are the returns on funds invested for bill : What are the returns on funds invested for Bill and Erica respectively? P

The international fisher effect : Also assume that you believe in the International Fisher Effect. What is your expected spot rate of Argentine Peso in one year with respect to the U.S. dollar?

What is expected spot rate of british pound : What is your expected spot rate of the British pound in one year with respect to the Australian dollar?

How energy and materials flow in your local ecosystem : An overview of your selected issue. How energy and materials flow in your local ecosystem and how this is related to your selected issue.

Dollars that boston will receive in one year : Estimate the amount of U.S. dollars that Boston will receive in one year when converting its € receivables into U.S. dollars.

User Account

All Pages