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Question:
a) Using illustrative and numerical examples, differentiate between arbitraging and speculation in the context of foreign exchange market.
b) One year borrowing and deposit interest rates are 12% and 10% respectively in the Republic of Tran and 10% and 8.89% respectively in the Kingdom of Sylvania. The spot exchange rate for the Tran dollars is $14 to the Sylvan Francs. The 12-month forward rate is $14.52. The economies are pegged together, and have been so for a number of years.
i) Suggest a way you may profit from the pricing inconsistency that is presented here, consider you have no initial investment funds.
ii) Will the situation persist forever? Describe your answer.
iii) What could be the spot rate which would bring a no-arbitrage situation?
Question : (a) Compare the financial system of the Mauritius and USA. Give differences between the two systems. (b) One of the facilities given by the financial system is
a) The option to expand the capacity of a project can be viewed as owning what kind of option written on the underlying project? Explain b) The option to shutdown a proje
ABAN LOYD CHILES OFFSHORE LTD. Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4
Suppose the dividends for the Seger Corporation over the past six years were $1.36, $1.44, $1.53, $1.61, $1.71, and $1.76, respectively. Compute the expected share price at the end
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Assume that there are two firms, firm A and firm B. The firms have identical present values at £10,000 and an identical future value profile as given in the picture below. The prob
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