Question
Calculate the effective financing rate of a six-month Swiss franc loan based on the given information: Swiss six month interest rate 4.55-6.75 Initial exchange rate
- Calculate the effective financing rate of a six-month Swiss franc loan based on the given information:
| Swiss six month interest rate | 4.55-6.75 |
| Initial exchange rate (AUD/CHF) | 1.1575-1.1625 |
| Exchange rate on maturity (AUD/CHF) | 1.1375-1.1465 |
[5 marks]
- The current one-year US interest rate is 9% p.a., and AUD/USD exchange rate is 1.3100. The exchange rate that is expected to prevail in one year has the following probability distribution:
| AUD/USD | Probability |
| 1.25 | 0.08 |
| 1.29 | 0.12 |
| 1.31 | 0.15 |
| 1.35 | 0.30 |
| 1.38 | 0.35 |
Using above information, calculate the expected value and the standard deviation of the effective financing rate in USD. [20 marks]
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Dividend Investing For Beginners Build Your Dividend Strategy Buy Dividend Stocks Easily And Achieve Lifelong Passive Income
Authors: G. R. Tiberius
1st Edition
B099TLJRT2, 979-8541466690
