Question
In: Finance
Please show how answer is derived. Assume the information below to answer the following questions: (1)...
Please show how answer is derived. Assume the information below to answer the following questions:
| (1) If you use covered interest arbitrage for a 90-day investment, what will be the amount of US dollars you will have after 90 days? |
| (2) What is the percentage gain or loss on an annual basis? |
| Amount of investment | $5,000,000 |
| Current spot rate of pound | 1.28 |
| 90-day forward rate of pound | 1.25 |
| 3-month deposit rate in US | 2% |
| 3-month deposit rate in UK |
3% |
Solutions
Expert Solution
SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE
jeff jeffy answered 1 year agoRelated Solutions
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Other (fixed) 5,500
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$0.70
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Total Revenue
Total Cost
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MR
MC
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0
17
0
0
1
16
16
4
2
15
14
6
3
14
12
8
4
13
10
10
5
12
8
12
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less Cost of Goods Sold:
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346,125
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726,375
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609,500
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50,000
85,875
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20,000
34,350
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$
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12/31/2016
12/31/2017
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