What is the net spread earned on the investment

Assignment Help Finance Basics
Reference no: EM131633734

Question: A bank purchases a six-month $1 million Eurodollar deposit at an interest rate of 6.5 percent per year. It invests the funds in a six-month Swedish krona bond paying 7.5 percent per year. The current spot rate of U.S. dollars for Swedish krona is $0.18/SKr. ( LG 23-1 )

a. The six-month forward rate on the Swedish krona is being quoted at $0.1810/SKr. What is the net spread earned on this investment if the bank covers its foreign exchange exposure using the forward market?

b. At what forward rate will the spread be only 1 percent per year?

Reference no: EM131633734

Questions Cloud

Define provoke our acceptance of hannibal lecter : Use a specific scene analysis to show how Demme uses editing to provoke our acceptance of Hannibal Lecter
What is the pension fund manager interest rate risk exposure : When purchased in two years, the T-bond will pay interest semiannually. Currently, it is selling at par.
Prepare a schedule of depercation expense : Rita's Plzza bought equipment on January 2, 2014 for $50,000. Prepare a schedule of depercation expense, accumulated depreciation
For which reason fails to recognize the differences : For which reason fails to recognize the differences among different cultures?
What is the net spread earned on the investment : The six-month forward rate on the Swedish krona is being quoted at $0.1810/SKr. What is the net spread earned on this investment if the bank covers its foreign.
Discuss what is your area of nursing expertise : What is your area of nursing expertise. What is your current position or work in nursing
Write an essay on the same sex marriage : On June 26, 2015, The United states Supreme Court ruled that same sex marriage is a constitutional right and will be aloud in all 50 states of the Union.
Which agency or bureau has the most influence and why : Which agency or bureau has the most influence and why? Include a recent news article from the last two months illustrating this agency in action.
Oliver switches to the new plan offered : If Oliver switches to the new plan offered, how many gigabytes will he download? Show work to iilustrate the answer

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

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