If the interest rate in Oman is 10% and in China is 15%. Current spot exchange rate is CNY16.59/OMR and one year forward rate is CNY16.57T/OMR. If you have the option to borrow OMR 1,000 from bank Muscat for one year then, on the basis of covered interest arbitrage how much arbitrage profit you can make? OMR 51.3880 None of these OMR 1,051.3880 OMR 1,000

If the interest rate in Oman is 10% and in China is 15%. Current spot exchange rate is CNY16.59/OMR and one year forward rate is CNY16.57T/OMR. If you have the option to borrow OMR 1,000 from bank Muscat for one year then, on the basis of covered interest arbitrage how much arbitrage profit you can make? OMR 51.3880 None of these OMR 1,051.3880 OMR 1,000

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Use the information below to calculate the expected gain or loss on the carry trade strategy for an initial borrowed amount of 1,000,000 (you will have to determine the currency of borrowing). Keep at least two decimals in your calculations but round up or down at the end (enter the final answer without decimals). Current spot rate of Polish zloty (PLN/EUR) Expected future spot rate of of zloty (PLN/EUR) in three months Annualized three-month interest rate on Polish zloty (%) Annualized three-month interest rate on euros (%) 3,119,971 135,769 margin of error +/- 10 4.64 4.11 3.77 1.53
DO NOT USE AI TO COMPLETE An investor enters today into a one-year-long currency forward on 1000000 units of foreign currency. The current exchange rate is 1.05 dollars per Swiss franc. Interest rates in the US and Switzerland are 3% and 4% per annum, respectively, with continuous compounding. A. What should be the delivery price for this contract? B. Explain the transactions that will occur at maturity if the spot exchange rate at that moment is1.03 dollars per Swiss franc
1. Assume you notice the following information. Assume you spend $1 million USD to create an arbitrage trading strategy. What is your profit is USD. Remember to consider the profit after you pay back your loan Spot (CAD/USD)=1.75 • 1 Year Forward (CAD/USD) = 1.65 • 1 Year Canadian interest rate of 3% in Canadian Dollars (CAD) • 1 Year US interest rate of 4% in US Dollars (USD) 592,484.85
If spot rate is USD2.5968/OMR and interest rate for USD is 2% per annum. One-year forward exchange rate is USD 2.6008/OMR. If interest rate parity holds and USD is the Home currency, then calculate the interest for OMR? 1.8431% 0.021571% 2.1571% 0.018431%
Today's spot exchange rate: 1 euro = $1.25.US interest rate (home interest rate) is 7%.EU interest rate (foreign interest rate) is 10%.a) If the IRP (Interest rate parity) holds, what should the forward exchange rate be today?b) Assume that today, you invest $500 in the EU market for one year and at the same time, enter a currency forward contract to sell euro in a year at the forward rate from part a). If today's spot exchange rate is: 1 euro=$1.32 instead of $1.25, show how much profits or losses you make next year.
Newstar Co. expects to pay 500,000 euro in one year. Assume the annual interest rate of borrowing or lending euro is 1% and the annual interest rate of borrowing or lending U.S. dollar is 2%. The spot rate of euro is $1.12 per euro. How much guaranteed amount of U.S. dollar does the company expect to pay after hedging the euro payable transaction in the international money market? (pick the closest answer) A. 565,545 USD. B. 554,510 USD. C. 562,786 USD. D. 576,912 USD.
Covered Interest Arbitrage in Both Directions. Thefollowing information is available:• You have $500,000 to invest.• The current spot rate of the Moroccan dirham is$.110.• The 60-day forward rate of the Moroccan dirham is $.108.• The 60-day interest rate in the United States is1 percent.• The 60-day interest rate in Morocco is 2 percent.a. What is the yield to a U.S. investor who conductscovered interest arbitrage? Did covered interest arbitrage work for the investor in this case?b. Would covered interest arbitrage be possible for aMoroccan investor in this case?
Currently, the spot rate is RM4.2000/USD and the one year forward rate is RM4.1000/USD. Interest rate in United States is 3% per annum and in Malaysia is 2% per annum. Assume that you can borrow as much as USD100,000 or RM420,000 for your coming project. If Interest Rate Parity (IRP) is not holding, determine how would you carry out covered interest arbitrage (CIA) and compute the profit.
Suppose that the interest rate on a US dollar deposit is 3% and the interest rate on a Japanese yen deposit is 1%. Today’s exchange rate is $1/¥ and the expected rate one year in the future is $1.2/¥, so $100 today can be exchanges for ¥100. Which currency deposit yield a higher expected rate of return (which currency investors should be willing to hold)? Why?
The spot rate for the Japanese yen currently is A??Y107 per $1. The one-year forward rate is A??Y106 per $1. A risk-free asset in Japan is currently earning 7 percent. If interest rate parity holds, what rate can you earn on a one-year risk-free U.S. security? 6.07 percent 7.94 percent 8.01 percent 8.08 percent 6.00 percent
Suppose exchange rates are: EUR/AUD = 1.5550 GBP/AUD = 2.8923 GBP/EUR = 1.8600 Starting with 10,000 AUD, what are the one-round-trip arbitrage profits rounded to the nearest AUD? 14,180 AUD No arbitrage profit is possible. 1,961 AUD 73,654 AUD
Suppose the going one year interest rate in the U.S. is 3% while it is 1% in the Japan. Furthermore, the going exchange rate is 110 Japanese yen/ U.S. dollar. What is the effective financing rate in the U.S. from borrowing in Japan? -2% 2% 1% Not enough information is provided.

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