Assignment: Case Analysis

For this assignment, download the supporting spreadsheet and answer the case analysis questions below.

Case Questions

#$1$: What is the hedged cost of funds $($in U$.$S$.$ dollars$)$ to Vale from the euro and British pound issues?

In order to answer this question, you need to complete TN$1$ spreadsheet attached $($Bond cash flows in different currencies and using the following forward rate formula$)$:

$f_t=s\frac{(1+r_d)}{(1+r_f)}$

$f_{30\text{d}\text{a}\text{y}\text{s}}=s\frac{(1+\frac{r_d}{12})}{(1+\frac{r_f}{12})}$

the correct calculation would be:

$f_{2\text{y}\text{e}\text{a}\text{r}\text{s}}=s\frac{(1+r_d{)}^2}{(1+r_f{)}^2}$