Question
INTERNATIONAL FINANCE On checking the Telerate screen, you see the following exchange rate and interest rate quotes: Currency Annual lending and borrowing rates Spot rates
INTERNATIONAL FINANCE
On checking the Telerate screen, you see the following exchange rate and interest rate quotes:
Currency |
Annual lending and borrowing rates |
Spot rates |
30-day forward rates |
US Dollars |
6.72% - 7.20% |
|
|
New Zealand |
6.48% - 6.96% |
$0.50 |
$0.52 |
How can you engage in money market instruments (i.e borrowing and investing) to make a profit? Ensure to state the interest rate, adjusted interested rate and exchange rate you will use at each stage. Assume you can either borrow NZ$40 million or US$ 20 million and invest for 30 days.
4a. Which currency appreciated and by how much? Show the computation
Formula:
4b. Computations:
4c. Interpret the results:
4d. It is logical to borrow US dollars or New Zealand dollars? Fully explain
4e. Use the table below to clearly show your work.
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