Explain foreign exchange market, Corporate Finance

Assignment Help:

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?


Related Discussions:- Explain foreign exchange market

Explain how transactions in the queue are managed, Question: (a) The Ma...

Question: (a) The Mauritius Automated Clearing and Settlement System (MACSS) is the Mauritian Real-time Gross Settlement (RTGS) system. (i) Define the term gross settlement

Should the firm take on the warehouse renovation, Question: (a) Discuss...

Question: (a) Discuss the concept of financial gearing and its implications for share price maximisation. (b) A firm has both, a current and a target debt-equity ratio of 0.

Mergers & Acquisitins, Relationship between the size of companies and the r...

Relationship between the size of companies and the role of M & A

Compxm exam, can you assist with the all the rounds in compxm exam?

can you assist with the all the rounds in compxm exam?

303, What is the annual rate of return on an investment in a common stock t...

What is the annual rate of return on an investment in a common stock that cost $40.50 if the current dividend is $1.50 and the growth in the value of the shares and the dividend is

Find net payment of the company, a)    Black Corp. currently has $65 millio...

a)    Black Corp. currently has $65 million worth of floating rate debts carried at an average rate of LIBOR + 2.6% that it would like to hedge against rising interest rates withou

Replacement decision, Baobab rolling mills owns a lathe machine which was p...

Baobab rolling mills owns a lathe machine which was purchased 10years ago at sh. 75 million. The machine had an expected life of 15 yrs at the time it was purchased, and management

Correlation coefficiant, the variance of stock a is .004,the variance of ma...

the variance of stock a is .004,the variance of market is .007,co variance between two is .0026 calculate correlation coefficient

Test solution.free., Initial investment 1950000 net cash flow 2075246 disco...

Initial investment 1950000 net cash flow 2075246 discount 15% find irr. Please solve in detail. regards thanks. .

Write Your Message!

Captcha
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