Use the following information to calculate the dollarcost of using a money market hedge to hedge 200,000Jordanian Dinar of payables due in 180 days. Assumethe spot rate of the Jordanian Dinar is $2.02 and the180 day forward rate is $2.00. The Jordanian interestrate is 5%, and the U.S. interest rate is 4% over the180 day period. A)$391,210. B)$396, 190. C)$384,762. D)$400, 152 E)none of these.

To calculate the dollar cost of using a money market hedge, we'll follow these steps:Calculate the…

Answered: Use the following information to…

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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You checked with the foreign exchange dealer and find out that rate for Kuwaiti Dinar for 180 days transaction is trading at KWD 0.87/OMR. This exchange rate is referred to as___________ * Forward Rate Spot Rate Par rate Coupon rate
Suppose that the interest rates in Norway and the US are, respectively, 8% and 4%. Suppose that the spot price of the Norwegian Kroner is $0.155. A three - month forward contract on Norwegian Kroner is available for $0.156. Is there a possibility of arbitrage? If yes, how can you earn the arbitrage profit?
You are given that the annual Australian dollar interest rate is 1% and the United States annual interest rate is 2.5%. The spot rate for the United States dollar is $A1.20. (a) Using interest rate parity, calculate the forward rate premium of the United States dollar with respect to the Australian dollar. (b) Using your answer to (a), calculate the one-year forward rate.
You Answered Today you observe the folowing quotes: Spot EURUSD $1.37 60 Day Forward EURUSD = $1.15 In 60 day you expec to receive 281,718 Euros. In 60 days you expect the EURUSD exchange rate to be $1.17. In 60 days the EURUSD actually is $1.21. You decided to hedge your receivables with a forward. How many USD will you receive? 232,824.79
In June 2010, an investor is considering investing in bank deposits in Korea and Japan. Theannual interest rate on Korean deposits is 6.25%, versus 3.75% on deposits in Japan. Supposethat the forward rate (for June 2011) in June 2010 is equal to F(won/yen) = 8.2. In June 2010, theexpected exchange rate is 8.2 won/¥. For the remainder of this question, use the linearapproximations for uncovered and covered interest rate parity. The spot exchange rate in June2010 is E(won/yen) = 8 a. Does covered interest parity hold in this example?b. Does uncovered interest parity hold in this example?c. Suppose the exchange rate in June 2011 is equal to 7.472 won per yen. Calculate theinvestor’s actual return, assuming that he invests in Japanese deposits in June 2010.How do these answers compare with those from (b)?d. Consider two investors: one uses speculation and the other uses hedging. Based on yourprevious answers, which one earned a higher return (or smaller loss) on Japanese assetsbetween June…
suppose you purchased a 10 million one-year Australian dollar loan that pays 7 percent interest annually. The spot rate of U.S. dollars for Australian dollars (AUD/USD) is $0.820/A$1. What is par value of the loan in U.S. dollars?
Assume the following information: 90-day U.S. interest rate 90-day Malaysian interest rate 3% 5% 90-day forward rate of Malaysian ringgit Spot rate of Malaysian ringgit $0.394 $0.398 Assume that the Santa Barbara Co. in the United States will need 250,000 ringgit in 90 days. It wishes to hedge this payables position. Would it be better off using a forward hedge or a money market hedge? Substantiate your answer with estimated costs for each type of hedge. Do not round intermediate calculations. Round your answers to the nearest dollar. The firm will pay out $ in 90 days if it uses the forward hedge and $ if it uses the money market hedge. Thus, it should use the -Select- hedge.
You have $ 10 million to invest. If you invest the money in the US for six months, you can earn 2%/year. Alternatively, you can invest in Switzerland and earn 4%/year. The spot exchange rate is CHF 0.9188/$. The forward exchange rate for delivery six months hence is CHF 0.9188/$. Which method of investing do you prefer and what will be the value of your investment at maturity? Assume no transaction cost. O Invest in the US; $10,373,610 Invest in Switzerland; $10,202,013 O None of these O Invest in Switzerland; CHF 10,373,610 O Invest in the US; $10,100,502
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The spot rate between Japan and the U.S. is ¥100.37 = $1, while the one-year forward rate is ¥99.97 = $1. A one-year risk-free security in the U.S. is yielding 3.8 percent. What is the rate of return on a one-year risk-free security in Japan assuming that interest rate parity exists?
the question in the picture says: Suppose that the current exchange rate is £1.73 = $1, but it is expected to be £1.69= $1 in one year. If the current interest rate on a one year government bonf in the united states is 5%, what dies the interest rate parity condition indicate the interest rage will be on a one yeat government bond in Germany? assume that there are no differences in risk, liquidity, taxation, or informatjon costs between the bonds. The German interest rage will be _%? (Round your response to two decimal places.)

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