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Given: interest rates are 8% in the U.S. and 5% in the U.K. The spot exchange rate for British pounds is 1.23 $/ and the
- Given: interest rates are 8% in the U.S. and 5% in the U.K. The spot exchange rate for British pounds is 1.23 $/ and the 1-year forward rate is F1-yr = 1.25 $/. You wish to borrow dollars. How can you effectively (synthetically) borrow $1,000,000 for one year without using the U.S. money market? (List each transaction you would make including the amounts of each currency involved.) What is the implied interest rate on your synthetic yen loan? Should you borrow yen directly or synthetically?
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Business Finance Theory And Practice
Authors: Eddie McLaney
7th Edition
0273702629, 978-0273702627
