Question
For the next six months, your company wants to invest $20,000,000 in cash. T-bills in the U.S. are paying 3.50% per annum and the British
For the next six months, your company wants to invest $20,000,000 in cash. T-bills in the U.S. are paying 3.50% per annum and the British equivalent is paying 4.00% per annum. The current spot rate is 1 USD = 0.801356 GBP, and the nine month forward rate is 1 USD = 0.805335 GBP. (30 points...show all calculations for maximum credit)
A. Where should you invest to earn more and what is the net difference in earnings? (15 points)
B. What is the equilibrium forward exchange rate that would make the GBP earnings the same as the US? (15 points)
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Succeeding in Business with Microsoft Excel 2013 A Problem Solving Approach
Authors: Debra Gross, Frank Akaiwa, Karleen Nordquist
1st edition
978-1285099149, 9781285963969, 1285099141, 1285963962, 978-1285715346
