Question
In the report to the board of directors of AfterPay, you are expected to: a) Discuss the scenario below, as to whether a riskless opportunity
In the report to the board of directors of AfterPay, you are expected to:
a) Discuss the scenario below, as to whether a riskless opportunity exists in the FX market and how to capitalise the opportunity.
Suppose that you can borrow 21 million today. Assume that the current spot rate is 110/AUD and that the 6-month forward rate (Forward
/AUD) is Forward /AUD = 107/AUD. The 12-month interest rate on a Yen deposit is 0.1% and on an AUD deposit is 7.5%.
b) Discuss the advantages and disadvantages of derivative instruments.
c) Explain why a put option on a bond is conceptually the same as a call option on interest rates.
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Introduction to Finance Markets, Investments and Financial Management
Authors: Ronald W. Melicher, Edgar A. Norton
16th edition
1119398282, 978-1-119-3211, 1119321115, 978-1119398288
