Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Dr. Rashid Mubarak Al Mazro was closely, associated with Bank of Japan, Bank of Europe, State Bank of India and Bank Kuwait from the period

image text in transcribed
Dr. Rashid Mubarak Al Mazro was closely, associated with Bank of Japan, Bank of Europe, State Bank of India and Bank Kuwait from the period 22nd December 2006 to 31st January 2015. Due to professional changes and higher designation, he started working in Al Jadeed Currency Exchange in Dubai, UAE from the year 16 February 2015 till 313 March 2020. Due to the impact of COVID 19. Dr. Rashid Mubarak Al Mazrol decided to take advantage of the major currencies by playing a safer role with the interest rates of two multinational banks for reaping profit with an initial investment of USD 5 Million. In order. to avoid any misleading decision from his side, Dr. Rashid Mubarak Al Mazro hired a Forex Management student from Nizwa College of Technology (HCT), Al Nizwa to provide valuable inputs pertaining to the period of investment and their details are given below. Option:1 One Year interest rates in Japan is 7 per cent per annum and the United O. is 9 per cent per annum. The Spot rate (S) and 360 Days Forward market rates (F.) is JPY 0.00934/USD and JPY 0.00947/USD, respectively. Option:2 One Year interest rates in Europe is 6 per cent per annum and the United States is 8 per cent per annum. The Spot rate (St) and 360 Days Forward market rate (F) is USD 1.46/EUR and USD 1.49/EUR, respectively. Option: 3 One Year interest rates in India is 8 per cent per annum and the United States is 6% per cent per annum. The Spot rate (Si) and 360 Days Forward market rate (F.) is INR 76.0123/USD and INR 76.8190/USD, respectively. Option: 4 One Year interest rates in Kuwait is 10 per cent per annum and the United States is 9 per cent per annum. The Spot rate (S.) and 360 Days Forward market rate (F) is KWD 0.311/USD and KWD 0.315/USD, respectively. By ignoring the transaction costs, you are required to provide the answer for the following question: a) Calculate the Covered Interest Rate Arbitrage opportunity prevailing in all the FOUR options? (8 - Marks) b) Which is the best possible option for Dr. Rashid Mubarak Al Mazzei to transfer the fund from JPY to USD, EUR to USD INR to USD and KWD to USD? (1 - Mark) c) What is the overall Profit or Loss for Dr. Rashid Mubarak Al Mazrol in all the FOUR option? (1 - Mark)

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

Internal Audit Leadership Elevating The Internal Audit Function To Accelerate Value

Authors: Patricia Kaim

1st Edition

1032557168, 978-1032557168

More Books

Students also viewed these Accounting questions