Given the information: Interest rate in US (Rh): Interest rate in UK (Rf): The current spot rate for GBP (SR₂): Suppose your lines of credit are USD 15,000,000 in the US and GBP 10,000,000 in UK. If your forecast tells you that the spot rate of GBP one year later (SR₁) will be $1.535, then your preferred investment strategy should earn a net profit of: GBP 41,694 GBP 200,000 USD 64,000 6% 4% $1.50 USD 300,000
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- Consider the following hypothetical investment for the fund. Issue a one-month liability and purchase a $1,000, 15-year, 5% coupon Treasury bond. Assume that the one-month interest rate is currently 2% and that the 15-year interest rate is currently 5%. How much in liabilities would the fund have to issue to finance the purchase of the Treasury bond? At the end of one year the fund has received the coupon-interest payment on the bond and paid interest on its short-term liabilities. What is the net earnings for the fund for that year? What is the value of the bond investment at the end of the year (there are 14 years to maturity remaining on the bond) assuming that the long-term rate is still 5%? What is the net asset value (market value of assets minus liabilities) of the fund?Jane, who works for the economic research department in a multinational corporation, is preparing a report for the advisory board of the company. The report intends to clarify in which country they should invest given the expected change in demand. The objective is, of course, to identify the country with greater change in demand. Jane analyzes countries A and B that currently have the same demand. She calculates the partial derivatives of demand with respect to income and finds that for country A it is greater than for country B. Demand in country A is measured in pounds and in country B in Kg. Can we conclude that if the only change expected in both countries is a change in income of 3.5%, then the company should invest in country A? no, we should calculate instead the income elasticity for the consumption of the good the company sells in each country. There is no statistic that can illuminate the advisory board on this problem. yes, because the derivative tells us that for each…Question at position 7 Consider an investment with upfront cost of $13,258. The net revenue associated with it during the first year of operation is $-4,925. The net revenue associated with it during the second year of operation is $16,521. The net revenue associated with it during the third year of operation is $26,583. What is the net present value of this investment if the nominal discount rate is 0.07?
- investment A promises to pay £500,000 profit at the end of the first year, £550,000 at the end of two years, £600,000 at the end of three years, and £625,000 at the end of four years. Investment B promises to pay £25,000 profit at the end of the first year, £100,000 at the end of two years, £600,000 at the end of the third year, and £1,000,000 at the end of four years. Assume that nine percent per year is an appropriate discount rate for each investment. Also, assume a zero-scrap value for each investment at the end of four years. Determine which investment promises to be the better of the two for the companyQuestions: Compute the expected intrinsic price of each stock in year 5. Assume that All stocks are fairly priced such that the intrinsic and market values are equal. Dividends are paid at the beginning of the year How many units of each stock will Stephanie buy? Support your response with relevant computations. What will be the total investment cost for shares? Show appropriate calculations. Which bonds are acceptable for investment? Justify your response with suitable computations. What will be the total cost of investment in bonds? Do the stock and bond investments fall within Stephanie’s investment guidelines? Show appropriate computations in support of your response. Will Stephanie have enough funds for her investment in stocks and bonds, when needed? What will be the surplus / shortfall, if any? Given that Stephanie’s bank offers an interest rate of 6% per year, what additional amount should she have deposited as a fixed…An annuity-due has 26 payments of $200 per period. The effective rate of interest per period is 8% for the first 12 periods and 4% for the following 14 periods. (A) Find the accumulated value of the annuity using the portfolio method. Round your answer to 2 decimal places. (B) Find the accumulated value of the annuity using the yield-curve method.. Round your answer to 2 decimal places.
- Over the next three years, the expected path of 1 year interest rates is 1, 2, and 1 percent, and the 1-year, 2-year, and 3- year term premia are 0, 0.2. and 0.5 percent, respectively. Using the information, if the expectations theory of the term structure is true, then your expected rate of return for buying a two-year bond today over the next two-year is ____% (round to the nearest integer).Calculate the bond yield rate (%) for a bond with an annual interest payment of $200 and a market price of $9,000.Assume that your rich aunt has given you $25,000 in a gift. You have come up with three ways to spend (or invest) the capital. First, you want (but do not need) a new car to make your home and social life brighter. Second, you can invest the money in the common stock of a high-tech company. Price is expected to grow by 20 percent a year, but this option is very risky. Third, you can put the money into a three-year deposit certificate with a local bank and receive 6 percent annually. The third alternative carries little risk. a. If you plan to buy the new vehicle, what is the cost of that option for the opportunity? Explain what you think in your own words.b. If you invest in the popular high-tech stock, what is the cost of that option for the opportunity? Explain what you think in your own words.
- Current market conditions are as follows: spot rate (e) between dollar and pound is $1.33 = £1. The rate of return on 1-year domestic bonds (i$) is 1% and the rate of return on 1-year British bonds (i£) is 2%. What is the expected spot rate (ee) 1 year from now that eliminates any arbitrage opportunities given the current market conditions? (Round your answer to 2 decimals).Suppose a bond with no expiration date has a face value of $10,000 and annually pays a fixed amount of interest of $800. Compute and enter in the spaces provided in the accompanying table either the interest rate that the bond would yield to a bond buyer at each of the bond prices listed or the bond price at each of the interest yields shown. What generalization can be drawn from the completed table?In January of 2019 , Sweden announced that it would increase its sale of government bonds from 55 billion krone to 85 billion krone. This resulted in (an increase, decrease, no change, an ambiguous change) in the price of government bonds and (an increase, decrease, no change, an ambiguous change) in the yield of government bonds.