A U.S. Based company has a short-term cash balance of USD 10 million. The company intends to invest in government securities for 120 days. The current spot rate and futures exchange rate (December 2017 futures) of USD against GBP are 1.6971 and 1.6950 respectively. The U.S. treasury bill rate is 15 percent per annum. The British 120- day gilt rate is 5.60 percent per annum.

A U.S. Based company has a short-term cash balance of USD 10 million. The company intends to invest in government securities for 120 days. The current spot rate and futures exchange rate (December 2017 futures) of USD against GBP are 1.6971 and 1.6950 respectively. The U.S. treasury bill rate is 15 percent per annum. The British 120- day gilt rate is 5.60 percent per annum.

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter27: Investment, The Capital Market, And The Wealth Of Nations

Section: Chapter Questions

Problem 9CQ

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