Given interest rates:o Deposit rate: 0.40% in € & 1.0% in £o Borrow rate: 0.50% in € & 1.1% in £• Investment Plan:o You use your own funds: $100o You can borrow additional funds either €250 or £200• Spot rates:o EUR/USD = 1.2 & GBP/USD = 1.5• Expectation:OUSD is expected to depreciate by 2.5% against EUR in 1 month.o USD is expected to appreciate by 1.5% against GBP in 1 month.Cross ratesa. GBP (appreciates/depreciates) against EUR byb. EUR (appreciates/depreciates) against GBP by

Cross rates : The cross rate should equal the ratio of the two corresponding pairs. It also refers…

Given interest rates: o Deposit rate: 0.40% in € & 1.0% in £ O Borrow rate: 0.50% in € & 1.1% in £ • Investment Plan: o You use your own funds: $100 o You can borrow additional funds either €250 or £200 • Spot rates: o EUR/USD = 1.2 & GBP/USD = 1.5 • Expectation: USD is expected to depreciate by 2.5% against EUR in 1 month. USD is expected to appreciate by 1.5% against GBP in 1 month. Cross rates a. GBP (appreciates/depreciates) against EUR by b. EUR (appreciates/depreciates) against GBP by

Given interest rates: o Deposit rate: 0.40% in € & 1.0% in £ O Borrow rate: 0.50% in € & 1.1% in £ • Investment Plan: o You use your own funds: $100 o You can borrow additional funds either €250 or £200 • Spot rates: o EUR/USD = 1.2 & GBP/USD = 1.5 • Expectation: USD is expected to depreciate by 2.5% against EUR in 1 month. USD is expected to appreciate by 1.5% against GBP in 1 month. Cross rates a. GBP (appreciates/depreciates) against EUR by b. EUR (appreciates/depreciates) against GBP by

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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You have account receivables: ₤5 m in one year. o InterestUS: 6.10% per annum & InterestUK: 9% per annum o Spot exchange rate: $1.50/£ & Forward exchange rate: $1.46/£ (1-year maturity) o Put option strike price: $1.46/£ & Put option premium: $0.02/£ How much will you receive in $ if you use the money market hedge?
I $ I E S ($/E) F ($/E) 5% 6% 1.5 1.4985 I $ - annual interest on 1 year US deposit; I E – annual interest on 1 year Euro deposit; S ($/E) – number of dollars per euro, spot F ¼ ($/E) – number of dollars per euro, 1 year forward On the basis of the price criteria: In which deposit would you invest? In which currency would you borrow? How would you arbitrage to make profit? What is the profit from interest arbitrage per 1000 dollars borrowed?
Please use the following information to answer You have account paybles: ₤5 m in one year.InterestUS: 6.10% per annum & InterestUK: 9% per annumSpot exchange rate: $1.50/£ & Forward exchange rate: $1.46/£ (1-year maturity)Call option strike price: $1.46/£ & Put option premium: $0.02/£How much will you receive in $ if you use the forward contract hedge? You must show all work to earn credit. No credit will be given without supporting work. 5,000,000 GBP x $1.46 = $7,300,000 $7,300,000 x 6.10% x 1 year = $445,300 $7,300,000 + $445,300 = $7.7453 million 2. Draw a graph for the forward contract hedge. (X axis is the spot rate in the future. Y axis is “$ cash paid.”)
Given CHF 3,500,000 as your capital, calculate the possible profit from covered interest arbitrage. Explain specific steps that you must take to make a coveredinterest arbitrage. CHF Fr = SwissFranc BND = Brunei Darul Salam Spot rate CHF0.7359/BND 270-day forward rate CHF 0.7359/BND 9-month Brunei interest rate 5% 9-month swiss interest rate 4% Step 1 1) Different i for Base rate -Quote rate = 2) Different between Spot and Forward = (1) + (2) = invest in _ borrow in _ Step 2 explain using table
Q1-14 Suppose the expected spot rate (after 1 year) for euros (in terms of dollars) is $1.50, the current interest rate on euro deposits is 4.5%, and the current interest rate on dollar deposits is 5.5%. What current spot rate would satisfy the uncovered interest parity (UIP) equation? a. $1.65 b. $1.50 c. $1.25 d. $1.485
Time value of money practice problems. How would you solve these using a financial calculator? What values would you enter for N, I/YR, PV, PMT, and FV ? *assume coporate bonds pay 2x annually and have a FV on $1000 a) Calculate the FV of depositing $4,000 for each of the next 10 years earning 8%.
Given CHF 3,500,000 as your capital, calculate the possible profit from covered interest arbitrage. Explain specific steps that you must take to make a coveredinterest arbitrage. CHF Fr = SwissFranc BND = Brunei Darul Salam Spot rate CHF0.7359/BND 270-day forward rate CHF 0.7359/BND 9-month Brunei interest rate 5% 9-month swiss interest rate 4%
A bank is offering a special deal. If you invest X now, the bank will give you 15,000 at time 7; 14,000 at time 8; 13,000 at time 9; and so on with the last payment being at time 14. Using an annual effective interest rate of 8%, determine X.
Q7. The annual payment of alorry is 40, 000 Euro find out theloan amount which is granted for4 years and the interest rate is8%, prepare an amortizationtable for this loan
Assume you have the following asset and liability in your Balance Sheet: Asset - Bond A Modified Duration = 2.6 years Value = RM1.5 million Liability - Bond B Modified Duration = 3.1 years Value = RM1.0 million a. Calculate the duration gap. b. What is the expected change in Net Worth if interest increases by 1%? Assume previous interest is 10% c. What should or could you to achieve immunised balance sheet? Note: Please show all workings.
An amount of P14,000 is borrowed at a discount rate of 10%, find the proceeds if the length of the loan is 180 days. a. P13,300 b. P13,000 c.P12,600 d. P12,200
Please answer all parts. Question 1) Purchase price: $395,000 Mortgage Amount: 80% LTV, 30 year fixed at 5% PAID ANNUALLY. Loan Origination expenses: 3% of total loan amount. NOI: $48,000 / Year Required return on investment (levered): 11% Expected price appreciation: 5% per year Selling Expenses: 4% Expected holding period: 2 Years What is the levered cash flow at time 0? What is the levered cash flow at time 1? What is the before tax equity reversion (BTER)? What is the total levered cash flow for time 2? What is the levered IRR?

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