#4 The spot exchange rate today is ¥125 = $1. The U.S. discount rate is 10%;...

#4

The spot exchange rate today is ¥125 = $1. The U.S. discount rate is 10%; inflation over the next three years is 3% per year in the U.S. and 2% per year in Japan. There is a project that requires an initial investment of ¥1,000,000, and generates ¥500,000 each year in the following 3 years.
Find the dollar cash flows to compute the dollar-denominated NPV of this project.

Exchange rate in year 1 = _____ (Round your answer to 2 decimal places)
Exchange rate in year 2 = _____ (Round your answer to 2 decimal places)
Exchange rate in year 3 =_____ (Round your answer to 2 decimal places)

Once you have the exchange rates for the next three years, find dollar cash flows to compute the dollar-denominated NPV = $_____

Use the same question from #4. The spot exchange rate today is ¥125 = $1. The U.S. discount rate is 10%; inflation over the next three years is 3% per year in the U.S. and 2% per year in Japan. There is a project that requires an initial investment of ¥1,000,000, and generates ¥500,000 each year in the following 3 years.
Find the Japanese cost of capital to compute the dollar-denominated NPV of this project.

Japanese cost of capital =_____ %. (Round your answer to 3 decimal places)
¥NPV = ¥_____
Convert ¥NPV into $NPV = $_____

(Please type work do not write, thank you!)

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 2 years ago

A spot exchange rate for the Euro / U.S. Dollar is 363.00 £/$.What’s the 1-month...

A spot exchange rate for the Euro / U.S. Dollar is 363.00 £/$. What’s the 1-month forward mid-rate ( £/$) when the quotes are an ask of -325? bid of -125?

The spot exchange rate for the British pound is $1.2576. The U.S. interest rate is 0.25...

The spot exchange rate for the British pound is $1.2576. The U.S. interest rate is 0.25 percent, and the British interest rate is 0.50 percent. A futures contract on the exchange rate for the British pound expires in 110 days. (a) Find the appropriate futures price. [3M] (b) Find the futures price under the assumption of continuous compounding. [3M] (c) Suppose the actual futures price is $1.3250. Is the future contract mispriced? If yes, how could an arbitrageur take advantage...

Assume that the spot exchange rate between U.S. Dollar and Chinese Yuan is $1 = 6.90...

Assume that the spot exchange rate between U.S. Dollar and Chinese Yuan is $1 = 6.90 yuans Compute the direct exchange rate between U.S. $ and Chinese yuan (i.e., value of 1 yuan in $). b)At this exchange rate, how much would a HP laptop which costs $725 in Houston cost in Beijing? (Ignore the costs of shipping and handling and any tariff) c,Assume that on pressure from the Trump administration, China agrees to let yuan appreciate by 15%. What...

The current spot exchange rate allows one to exchange £1 for JPY 140. The 10-year UK...

The current spot exchange rate allows one to exchange £1 for JPY 140. The 10-year UK spot interest rate is 1.5% and the 10-year spot rate in Japan is 0.1%. What is the no arbitrage value of the 10-year forward exchange rate of Sterling for Yen?

1.The current U.S. dollar-yen spot rate is 102¥/$. If the 90-day forward exchange rate is 101¥/$...

1.The current U.S. dollar-yen spot rate is 102¥/$. If the 90-day forward exchange rate is 101¥/$ what is the forward exchange premium or discount for ¥$. 2.Assume the current U.S. dollar-British spot rate is 0.71£/$. If the current nominal one-year interest rate in the U.S. is 2.7% and the comparable rate in Britain is 3.9%, what is the approximate forward exchange rate for 180 days?

Suppose that the $/€ spot exchange rate is 1.20 $/€ and the 1 forward rate is...

Suppose that the $/€ spot exchange rate is 1.20 $/€ and the 1 forward rate is 1.24$/€. The yields on 1 U.S. and EU. Treasury Bills are U.S 10% and EU 7%. Use the exact form interest parity condition. Note that these numbers are hypothetically constructed to give arbitrage profits. (1) Calculate the covered interest differentials using Covered IPC (extra profits from investing in EU). (2) Suppose that U.S. investor is considering a covered investment in EU Treasury bills financed...

Suppose that the current spot exchange rate is $1.25/€ and the 1-year forward exchange rate is...

Suppose that the current spot exchange rate is $1.25/€ and the 1-year forward exchange rate is $1.20/€. The 1-year interest rate is 2.00 percent per annum in the United States and 5.00 percent per annum in France. Assume that you can borrow up to $1,000,000 or €800,000. Calculate your arbitrage profit in €.

Suppose the spot exchange rate is €1 =$1.10, the expected exchange rate one year in the...

Suppose the spot exchange rate is €1 =$1.10, the expected exchange rate one year in the future is €1 =$1.122, the dollar interest rate is 4%, and the euro interest rate is 2%. b) To check for interest parity: i)Calculate the expected dollar rate of return on dollar deposits. ii)Calculate the expected dollar rate of return on euro deposits. iii)Does interest parity condition hold? c)Which currency deposits will the investors want to hold and how will the spot exchange rate...

Consider the following spot rate curve: 6-month spot rate: 4%. 12-month spot rate: 10%. 18-month spot...

Consider the following spot rate curve: 6-month spot rate: 4%. 12-month spot rate: 10%. 18-month spot rate: 14%. What is the forward rate for a 6-month zero coupon bond issued one year from today? Equivalently, the question asks for f12, where 1 time period consists of 6 months. Remember, like spot rates, forward rates are expressed as bond-equivalent yields. Round your answer to 4 decimal places. For example if your answer is 3.205%, then please write down 0.0321.

Daily Spot Exchange Rate, U.S. Dollars per Pound Sterling Date Rate Date Rate Date Rate 1-Apr-04...

Daily Spot Exchange Rate, U.S. Dollars per Pound Sterling Date Rate Date Rate Date Rate 1-Apr-04 1.8564 13-Apr-04 1.8160 23-Apr-04 1.7674 2-Apr-04 1.8293 14-Apr-04 1.7902 26-Apr-04 1.7857 5-Apr-04 1.8140 15-Apr-04 1.7785 27-Apr-04 1.7925 6-Apr-04 1.8374 16-Apr-04 1.8004 28-Apr-04 1.7720 7-Apr-04 1.8410 19-Apr-04 1.8055 29-Apr-04 1.7751 8-Apr-04 1.8325 20-Apr-04 1.7914 30-Apr-04 1.7744 9-Apr-04 1.8322 21-Apr-04 1.7720 3-May-04 1.7720 12-Apr-04 1.8358 22-Apr-04 1.7684 4-May-04 1.7907 5-May-04 1.7932 13-May-04 1.7584 21-May-04 1.7880 6-May-04 1.7941 14-May-04 1.7572 24-May-04 1.7908 7-May-04 1.7842 17-May-04 1.7695 25-May-04...

Question