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Assume that the current spot exchange rate is FF6.25/$ and the 3 month forward exchange rate is FF6.28/$. The 3 month interest rate is 5.6% per year in the U.S. and 8.8% per year in France. Suppose that you can borrow up to $1,000,000 or FF6,250,000.
a. Define how to realize a certain profit via covered interest arbitrage, assuming that you wish to realize profit in terms of U.S. dollars. As well determine the magnitude of arbitrage profit.
b. Suppose that you want to realize profit in terms of French francs. Define the covered arbitrage process and determine the arbitrage profit in French francs.
Explain and derive the international Fisher effect. Answer: The international Fisher effect can be acquired by combining the Fisher effect and the relative version of purchasi
Explain the implications of the deviations from the purchasing power parity for countries’ competitive positions in the world market. Answer: If exchange rate changes satisfy pu
Treasury bonds are the bonds issued with maturities greater than 10 years. However, these are commonly issued with a maturity of 30 years. Like T-notes, these bon
Cross-Sector Analysis: The growth of a country depends upon how fast a country can adapt to deregulation and internationalization. Deregulation and internationalization put com
a) Year 2 Current Ratio = 700 / 300 = 2.33 : 1 Year 1 Current Ratio = 500 / 200 = 2.5 : 1 Year 2 Acid Test = (700 - 350) / 300 = 1.17 : 1 Year 1 Acid Test = (500 - 250) / 200 =
Question 1 Describe the process involved in accounting. What are the objectives of accounting? Question 2 Briefly explain the role of management accounting. Also expalin the
WHAT IS METHOD FOR FINDING IRR
Let us consider a bond with callable or prepayable feature. Figure shows the price/yield relationship of option-free bond and callable bond. The price yield
Mr. X invests Rs. 10000 at 10% p.a compounded semi-annually. Compute value after three years.
Q. Cost of capital? The terms of cost of capital refers to the minimum rate of the return a firm must earn on its investment so that the market value of the company equity shar
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