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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.

Steps:

Ex rate

Interest Rate

Adj int rate

Computations

1

2

3

4

5

6.

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