Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

APS textiles BD LTD has a chance to make a small investment (US bond @ 10% annual interest rate) in USA. Recently the exchange rate

image text in transcribed

APS textiles BD LTD has a chance to make a small investment (US bond @ 10% annual interest rate) in USA. Recently the exchange rate between BDT and USD is fluctuating on a random basis. To reduce the exchange rate risk of USD investment, APS has decided to get in a 2-year forward contract to convert the proceeds to BDT in 2 years. APS has 10,000 BDT to invest at this moment. The current exchange rate (BDT/USD) = 84. 2-year forward rate (BDT/USD) = 85.2. What is the return (in BDT) on the total bond investment (BDT 10,000) in USA after 2 years

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals Of Futures And Options Markets

Authors: John C. Hull

4th Edition

0130176028, 9780130176028

More Books

Students also viewed these Finance questions