An investor located in the US has two investment options for her $105,000. One option is the US, where the interest rate is 3.5%. The other option is Australia, where the interest rate is in. The current exchange rate is $1 US buys 1.6 Australian dollars and the future expected exchange rate is $1 US buys 1.62 Australian. If the investor believes the the two future values are the same, what is in? O 3.10% O3.95% O4.79% O 5.25%

An investor located in the US has two investment options for her $105,000. One option is the US, where the interest rate is 3.5%. The other option is Australia, where the interest rate is in. The current exchange rate is $1 US buys 1.6 Australian dollars and the future expected exchange rate is $1 US buys 1.62 Australian. If the investor believes the the two future values are the same, what is in? O 3.10% O3.95% O4.79% O 5.25%

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter32: Building Theories To Explain Every Day Life: From Observations To Questions To Theories To Predictions

Section: Chapter Questions

Problem 11QP

See similar textbooks

Similar questions

Domingo has a total wealth of $500,000 composed of a house worth $100,000 and $400,000 in cash. He keeps the cash in a safe deposit box, so that it is completely safe. However, there is a 10% chance that his house will burn down by the end of the year and be worth nothing and a 90% chance that nothing will happen to it. Without insurance, the expected value of his end-of-year wealth is: Select one: a. $410,000. b. $490,000. c. $450,000. d. $485,000.
a) A U.S. firm that exports most of its products to Canada. Initially its products were invoiced in Canadian dollars to accommodate the importers. After a few more years of continual concern about possible exchange rate movements, it requested its Canadian customers to pay for future orders with U.S. dollars instead of Canadian dollars. The customers decided to oblige, since the number of Canadian dollars to be converted into U.S. dollars when importing the goods from the U.S. firm was still slightly smaller than the number of Canadian dollars that would be needed to buy the product from a Canadian manufacturer. Based on this situation, has transaction exposure changed for the U.S. firm? Has its economic exposure changed? Explain. b) A U.S. firm which has no other international business, plans to create and finance a subsidiary in Mexico to produce computer components at a low cost and export them to Caribbean islands and will invoice the products in U.S. dollars. The…
A corporate treasurer tells you that he has just negotiated a five-year loan at a competitivefixed rate of interest of 5.2%. The treasurer explains that he achieved the 5.2% rate byborrowing at six-month LIBOR plus 150 basis points and swapping LIBOR for 3.7%. He goeson to say that this was possible because his company has a comparative advantage in thefloating-rate market. What has the treasurer overlooked? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Decorators Co. got a 15-year loan from NatWest Bank in 2016 for an amount of £22 million. The loan was taken at an annual interest rate of 12%. After 5 years in 2021, Decorators Co. had managed to pay back £9.5million. Currently owing on the loan is the principal balance plus interest of £800,000. In 2021, the probability that Decorators Co. defaults on the loan is 4.5%, in the same year, if there is a default, NatWest bank expects that it will be able to recover 75% of the loan. Given the information above, you are required to determine: Exposure at default (EAD) Value of Loss given default value (LGD) Expected loss (EL)
**Practice** I have been trying to practcie this question but I always seem to get it wrong What is the expected final wealth of each agent? Pay attention to the names in each option!A. Anna’s expected final wealth is 1440 and Bob’s expected final wealth is 980B. Anna’s expected final wealth is 1020 and Bob’s expected final wealth is 1380C. Anna’s expected final wealth is 1460 and Bob’s expected final wealth is 1105D. Anna’s expected final wealth is 1140 and Bob’s expected final wealth is 1200E. None of the options above
im assuming B, less than but not sure it could more than
If you are going to design an instrument about the topic "COVID-19: Effects to philippine economy", what type of instrument it is why?
Today the euro costs $1.35. If the dollar gains strength against the euro at a rate of 3% per year, how much will the euro cost (in dollars) after five years (a) $1.20 (b) $1.41 (c) $1.16 (d) $1.09.
If MUx/Muy = Px/Py and X = 10; Y =10; MUx = y/x ; MUy = 1/2find the value of Px and Py
Q. Due to global uncertainty and geopolitical impact and anticipating recession in the waster countries, it is assumed that HUL may delivery the return based on the Indian Economic Condition. RBI projected the Indian Economic growth as follows. Projected Indian Economic Condition Probability of occurrence Possible Return from HUL (in %) Extremely Good 10% 22% Good 20% 18% Average 40% 15% Poor 20% 8% Severely Poor 10% 4% In this situation, if we invest in HUL, how much return can be expected? Also, suggest the possible risk involved in this investment.
Millicent’s utility function is U(w) = W0.5 , where W is her wealth. She owns a “pure water” producing firm that will be worth GH100 or 0 Ghana cedis next year with equal probability. a. Suppose her firm is the only asset she has. What is the lowest price at which she will agree to sell her pure water? (Hint: price=amount that will give her the same expected utility) b. Assume that she has GH200 safely stored under her mattress, find the new lowest price at which she will agree to sell her “pure water” producing firm c. From your answers in parts (a) and (b), what is the relationship between her wealth and her degree of risk aversion?
The case of transaction exposure is described as follows. Choose the correct answer in the parenthesis in the description of the case. The choice is in bold letters. My company sold a product to a German co., and sales department signed a contract to receive Euro 10,000 3 month later, A/R of Euro 10,000. The sales contract is delivered to my desk. I, a treasurer, am wondering how much USD my co. will get from Euro 10,000 3 months from now. The currency market is in turmoil, I will get more USD when USD weakens against EUR in the next 3 months. Market anticipates strong USD. However, if USD strengthens more than market expects, I will get (more /less) USD from sales contract of EUR 10,000. Are there any possibility to lock in my USD receipt to a certain level, or at minimum. In that way, my USD receipt will not get any lower even though USD appreciates more than the rate I can contract (buy EURO/sell EURO) now. How and what kind of contracts are available now to protect/hedge…