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() In Manor Farm, Snowball and Napoleon are trying to figure out how to manage the financial portfolio of the community. They know that the
() In Manor Farm, Snowball and Napoleon are trying to figure out how to manage the financial portfolio of the community. They know that the risk-free rate available for investment from Mr. Jones is at 10%. That is, they can turn over 100MF dollars to Mr. Jones, and he will give them back 110MF dollars in one year. Snowball and Napoleon know that Mr. Whymper also offers risk-free investments, but in US dollars ($). The current exchange rate is $2=1 MF dollars. Snowball and Napoleon have the following forward prices on MF dollars (quoted as US $ per MF dollar). If financial markets in and around Manor Farm are arbitrage free, transaction costs are minor, and the such - what rate of interest (for $ deposits) do you think Mr. Whymper should offer? () In Manor Farm, Snowball and Napoleon are trying to figure out how to manage the financial portfolio of the community. They know that the risk-free rate available for investment from Mr. Jones is at 10%. That is, they can turn over 100MF dollars to Mr. Jones, and he will give them back 110MF dollars in one year. Snowball and Napoleon know that Mr. Whymper also offers risk-free investments, but in US dollars ($). The current exchange rate is $2=1 MF dollars. Snowball and Napoleon have the following forward prices on MF dollars (quoted as US $ per MF dollar). If financial markets in and around Manor Farm are arbitrage free, transaction costs are minor, and the such - what rate of interest (for $ deposits) do you think Mr. Whymper should offer
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