How many Reals could you buy at the posted price? How much gold could you buy at the dollar price in the gold market? What would the gold be worth if the Real price is 750 BRL per ounce? If the Real price for gold is 750 BRL per ounce, how would you make arbitrage profits? How much would you make with your $10,000 investment?
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When you logged on to your brokerage account this morning, you saw that the Brazil Real is trading at 50.2970. Gold is trading at $200 per ounce. You have $10,000 to invest, and you think you might be able to make arbitrage profits in the gold market.
How many Reals could you buy at the posted price?
How much gold could you buy at the dollar price in the gold market? What would the gold be worth if the Real price is 750 BRL per ounce?
If the Real price for gold is 750 BRL per ounce, how would you make arbitrage profits? How much would you make with your $10,000 investment?
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- Suppose that the spot price of gold is US$1,700 per ounce. The quoted 1- year forward price of gold in the market is US$1,800, whereas it should have been $1,785. The 1-year US$ interest rate is 5% per annum. On the basis of the given information, answer the following: a) Is there an arbitrage opportunity? Why? b) If there is an arbitrage opportunity, show how will you exploit it? What will be the arbitrage profit? Hint: Recall that arbitrage means exploiting mispricing in the market to your advantage and any profit thus gained is risk-free. Use this understanding…You bought 200 shares of Mexican stock at a price of 100 pesos each. The exchange rate was 20 pesos to 1 USD. When you sold the stock, the stock price was 300 pesos. The exchange rate was 15 pesos to 1 USD. What is your profit in USD?Suppose money invested in a hedge fund earns 1% per trading day. There are 250 trading days per year. With an initial investment of $100, what will be your annual return assuming the manager puts all of your daily earnings into a zero-interest-bearing checking account and pays you everything earned at the end of the year? *Make sure to input all currency answers without any currency symbols or commas, and use two decimal places of precision.
- You are a treasure analyst for your bank. One of your large corporate customers is interested in a currency hedge and approached your bank for quotes on forward rates. Using the following data, answer the questions below: Spot USD / JPY 116.00 3 Months DOLLAR Deposit Rate 4.50% p.a. 6 Months DOLLAR Deposit Rate 5.00% p.a. 3 Months YEN Deposit Rate 0.25% p.a. 6 Months YEN Deposit Rate 0.52% p.a. FRA Rate for Yen Nil A ) What would be 6 months USD/JPY Forward Rate? B) What should be 3 month interest rate 3 months Forward? C )The 6 and 12 month USD LIBORS are 5% and 6.5% respectively. A bank is quoting 6/12 USD FRA at 6.50 – 6.75%. What position should you take to make a profit for your bank? D) Your bank has a 3 month euro deposit of 10 million which was converted to $TT to support the $TT liquidity position. The bank is concerned about currency risk. Briefly explain the risk to the bank and how can this be hedged using futures and options. NEED ANSWERS AND CALCULATIONS PLEASEYou are a treasure analyst for your bank. One of your large corporate customers is interested in a currency hedge and approached your bank for quotes on forward rates. Using the following data, answer the questions below: Spot USD / JPY 116.00 3 Months DOLLAR Deposit Rate 4.50% p.a. 6 Months DOLLAR Deposit Rate 5.00% p.a. 3 Months YEN Deposit Rate 0.25% p.a. 6 Months YEN Deposit Rate 0.52% p.a. FRA Rate for Yen Nil A ) What would be 6 months USD/JPY Forward Rate? B) What should be 3 month interest rate 3 months Forward?You are a treasure analyst for your bank. One of your large corporate customers is interested in a currency hedge and approached your bank for quotes on forward rates. Using the following data, answer the questions below: Spot USD / JPY 116.00 3 Months DOLLAR Deposit Rate 4.50% p.a. 6 Months DOLLAR Deposit Rate 5.00% p.a. 3 Months YEN Deposit Rate 0.25% p.a. 6 Months YEN Deposit Rate 0.52% p.a. FRA Rate for Yen Nil D) Your bank has a 3 month euro deposit of 10 million which was converted to $TT to support the $TT liquidity position. The bank is concerned about currency risk. Briefly explain the risk to the bank and how can this be hedged using futures and options.
- you have $1000, the exchange rate is as following: $100: 1 ounce of gold, ￥500: 1 ounce of gold, ￥8：$1, please use triangular arbitrage to make a profitIdentify and explain the markets in which the following in which the following trade in: used cars, paintings and rare coins. If, An investor initially pays K6 000 towards the purchase of K10 000 worth of shares at K100 each borrowing the rest from a broker, draw up the investor’s simple balance sheet to reflect this transaction and Calculate the initial margin and the margin if the share price falls to K70. Suppose the maintenance margin is 30 %. How far could the stock price fall before the investor would get a margin call? Suppose the margin is 40 %. How far can the stock price fall before the investor gets a margin call? An investor is bullish on a stock selling for K100. He instructs his broker to sell short 1000 borrowed shares. If the broker has a 50 % requirement on short sales, draw up the investor’s simple balance sheet to reflect this transaction. What will happen if the share price falls to K70? If the broker has a maintenance margin of 30 % on short sales,…Suppose you are a euro-based investor who just sold Microsoft shares that you had bought six months ago. You had invested 10,000 euros to buy Microsoft shares for $120 per share; the exchange rate was $1.13 per euro. You sold the stock for $141 per share and converted the dollar proceeds into euro at the exchange rate of $1.04 per euro. First, determine the profit from this investment in euro terms. Second, compute the rate of return on your investment
- You are a treasure analyst for your bank. One of your large corporate customers is interested in a currency hedge and approached your bank for quotes on forward rates. Using the following data, answer the questions below: Spot USD / JPY 116.00 3 Months DOLLAR Deposit Rate 4.50% p.a. 6 Months DOLLAR Deposit Rate 5.00% p.a. 3 Months YEN Deposit Rate 0.25% p.a. 6 Months YEN Deposit Rate 0.52% p.a. FRA Rate for Yen Nil C )The 6 and 12 month USD LIBORS are 5% and 6.5% respectively. A bank is quoting 6/12 USD FRA at 6.50 – 6.75%. What position should you take to make a profit for your bank? D) Your bank has a 3 month euro deposit of 10 million which was converted to $TT to support the $TT liquidity position. The bank is concerned about currency risk. Briefly explain the risk to the bank and how can this be hedged using futures and options.Suppose you are a euro-based investor who just sold Amazon.com Inc. shares that you hadbought six months ago. You had invested 10,000 euros to buy Amazon shares for $120 pershare; the exchange rate was $1.15 per euro. You sold the stock for $135 per share and convertedthe dollar proceeds into euro at the exchange rate of $1.06 per euro. a) Determine the profit from this investment in euro terms.b) Compute the rate of return on your investment in euro terms.c) How much of the return is due to the exchange rate movement?Samuel Johnson invested in gold U.S. coins ten years ago, paying $216.53 for one-ounce gold "double eagle" coins. He could sell these coins for $734 today. What was his annual rate of return for this investment?