Reference no: EM132664980

The ringgit was fixed to the U.S. dollar at RM3,80/$ for seven years. In 2005, the Malaysian government allowed the currency to float against several major currencies. The current spot rate today is RM3.13487/$. Local currency time deposits of 180-day maturities are earning 8.897% per annum. The London eurocurrency market for pounds is yielding 4.204% per annum on similar 180-day maturities, The current spot rate on the British pound is $1.5819/pd. and the 180-day forward rate is $1.5558/pd. The initial investment is 1,100,000.00 pds.

Problem 1: The investment proceeds from the initial investment is ________________pds round to two decimals

Problem 2: The return on the 180-day investment is __________________% round to three decimals

Problem 3: If Clayton Moore invests in the Malaysian ringgit deposit, and accepts the uncovered risk associated with the RM/$ exchange rate managed by the government, and sells the dollar proceeds forward, he should expect a return of _______________% on his 180 day pound investment. This is _______________ than the _____________% per annum he can earn in the euro-pound market. Round percentage to three decimal places