Question

In: Finance

You have a borrowing capacity of 5 million USD, and 500 million JPY. You observe that...

You have a borrowing capacity of 5 million USD, and 500 million JPY. You observe that the bid/ask interest rate quote on USD is 1%/3%. The bid/ask interest rate quote on the JPY is 0.5%/2%. The spot exchange rate is 85.9 JPY/USD, and you expect that the USD is going to appreciate to 98.4 JPY/USD over the next 6 months (180 days). If you conduct a speculative trade on your expectations of exchange rate change, and your expectations are correct, what will be your total profit, as measured in USD?

Solutions

Expert Solution

SEE EXCEL SHEET IMAGE

GO THROUGH

ANY DOUBTS, PLEASE FEEL FREE TO ASK

GIVE GOOD FEEDBACK


Related Solutions

You have a borrowing capacity of 5 million USD, and 500 million JPY. You observe that...
You have a borrowing capacity of 5 million USD, and 500 million JPY. You observe that the bid/ask interest rate quote on USD is 1%/3%. The bid/ask interest rate quote on the JPY is 0.5%/2%. The spot exchange rate is 85.9 JPY/USD, and you expect that the USD is going to appreciate to 98.4 JPY/USD over the next 6 months (180 days). If you conduct a speculative trade on your expectations of exchange rate change, and your expectations are correct,...
Question 1: You are borrowing USD 1000 for one year, at a coupon rate of 7.7%....
Question 1: You are borrowing USD 1000 for one year, at a coupon rate of 7.7%. You will get the money today, and will repay all principal and interest one year from today. If the current CAD per USD spot rate is 0.95, the CAD inflation rate is 3%, and the USD inflation rate is 1.6%, what is the CAD cost of debt for this loan? Question 2: The current MXN/CHF spot exchange rate is 26.5. The MXN inflation rate...
6. A) You observe the following quotes for the USD/AUD in the spot market from two...
6. A) You observe the following quotes for the USD/AUD in the spot market from two banks: Bank of Sydney Bank of New York Bid Ask Bid Ask 0.71711 0.71715 0.71708 0.71715 Do these quotes imply the possibility of earning a profit by using locational arbitrage? If so, calculate the potential profit if you are able to use AUD 25,000. If not, explain why arbitrage is not possible? B) You observe the following quotes for the GBP /AUD in the...
4. Hint a) You observe the following quotes for the USD/AUD in the spot market from...
4. Hint a) You observe the following quotes for the USD/AUD in the spot market from two banks: Bank of Sydney Bank of New York Bid Ask    Bid Ask 0.71711 0.71715 0.71708 0.71715 Do these quotes imply the possibility of earning a profit by using locational arbitrage? If so, calculate the potential profit if you are able to use AUD 25,000. If not, explain why arbitrage is not possible? (b) You observe the following quotes for the GBP /AUD...
4. a) You observe the following quotes for the USD/AUD in the spot market from two...
4. a) You observe the following quotes for the USD/AUD in the spot market from two banks: Bank of Sydney Bank of New York Bid Ask Bid   Ask 0.71711 0.71715 0.71708 0.71715 Do these quotes imply the possibility of earning a profit by using locational arbitrage? If so, calculate the potential profit if you are able to use AUD 25,000. If not, explain why arbitrage is not possible? (b) You observe the following quotes for the GBP /AUD in the...
You have 2 million dollars of wealth. You build $1, 500, 000 house at the beginning...
You have 2 million dollars of wealth. You build $1, 500, 000 house at the beginning of the year on the east coast of Florida. During the year there is a 10% chance that the house will be destroyed by a hurricane-related flood. However, you are able to purchase flood insurance for a premium of $10 per $100 dollars of insured house value for the year. In the event that your home is destroyed by a flood, the insurance company...
You are examining the financial statements of a company. You observe patent amortization of $1,5 million...
You are examining the financial statements of a company. You observe patent amortization of $1,5 million and a loss on impairment of goodwill for $25 million. (a) Describe hoe the accountants arrived at these amounts (b) Interpret any information content provided by these disclosures
Suppose you observe the investment performance of 500 portfolio managers for ten years and rank them...
Suppose you observe the investment performance of 500 portfolio managers for ten years and rank them by investment returns during each year. After ten years, you find that 10 of the funds have investment returns that place the fund in the top half of the sample in each and every year of your sample. Such consistency of performance indicates to you that these must be the funds whose managers are in fact, skilled, and you invest your money in these...
You are borrowing $26,000 to buy a car. You have a choice of a 36 month...
You are borrowing $26,000 to buy a car. You have a choice of a 36 month loan at an annual interest rate of 4.1 percent or a 60 month loan where the annual interest rate is 0.5 percent higher. If you select the 60 month loan instead of the 36 month loan, how much more total dollars of interest will you pay over the life of the loan?
You have been managing a $5 million portfolio that has a beta of 0.95 and a...
You have been managing a $5 million portfolio that has a beta of 0.95 and a required rate of return of 5.325%. The current risk-free rate is 2%. Assume that you receive another $500,000. If you invest the money in a stock with a beta of 1.15, what will be the required return on your $5.5 million portfolio? Do not round intermediate calculations. Round your answer to two decimal places.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT