Question
#1. Use the information below to answer the following question. Exchange Rate Interest Rate APR S 0 ($/) $ 1.60 = 1.00 i $ 2
#1. Use the information below to answer the following question.
| Exchange Rate | Interest Rate | APR | ||||||||||||
| S0($/) | $ | 1.60 | = | 1.00 | i$ | 2 | % | |||||||
| F360($/) | $ | 1.58 | = | 1.00 | i | 4 | % | |||||||
| | ||||||||||||||
If you had borrowed $1,000,000 and traded for euro at the spot rate, how many do you receive? (I had previously asked the same question but got two different answers. I was told 1,000,000/1.60 =625,000... and FV= 625,000(1+0.04)=650,000) Which one is the correct answer?
2. Use the information below to answer the following question.
| Exchange Rate | Interest Rate | APR | ||||||||||||
| S0($/) | $ | 1.60 | = | 1.00 | i$ | 2 | % | |||||||
| F360($/) | $ | 1.58 | = | 1.00 | i | 4 | % | |||||||
| | ||||||||||||||
If you had 1,000,000 and traded it for USD at the spot rate, how many USD will you get?
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Mathematics Of Finance
Authors: Robert Brown, Steve Kopp, Petr Zima
8th Edition
0070876460, 978-0070876460
