Intermediate Financial Management
14th Edition
ISBN: 9780357516782
Author: Brigham, Eugene F., Daves, Phillip R.
Publisher: Cengage Learning
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Chapter 27, Problem 7P
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To determine: The yield on 90-day risk-free securities in the country U.
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Assume that interest rate parity holds. In the spot market1 Japanese yen = $0.009144, while in the 90-day forward market 1 Japanese yen = $0.009184. In Japan, 90-day risk-free securities yield 2%. What is the yield on 90-day riskfreesecurities in the United States?
Assume that interest rate parity holds. In both the spot market and the90-day forward market, 1 Japanese yen equals 0.0086 dollar. In Japan,90-day risk-free securities yield 4.6%. What is the yield on 90-day risk-freesecurities in the United States?
Assume that interest rate parity holds. In the spot market 1 Japanese yen = $0.00905, while in the 90-day forward market 1 Japanese yen = $0.00913. In Japan, 90-day risk-free securities yield 1%. What is the yield on 90-day risk-free securities in the United States? Do not round intermediate calculations. Round your answer to two decimal places.
Chapter 27 Solutions
Intermediate Financial Management
Ch. 27 - Define each of the following terms: a....Ch. 27 - Prob. 2QCh. 27 - Prob. 3QCh. 27 - Prob. 4QCh. 27 - If the United States imports more goods from...Ch. 27 - Prob. 6QCh. 27 - Should firms require higher rates of return on...Ch. 27 - Prob. 8QCh. 27 - Prob. 9QCh. 27 - Prob. 10Q
Ch. 27 - Prob. 1PCh. 27 - The nominal yield on 6-month T-bills is 7%, while...Ch. 27 - Prob. 3PCh. 27 - If euros sell for 1.50 (U.S.) per euro, what...Ch. 27 - Suppose that the exchange rate is 0.60 dollars per...Ch. 27 - Prob. 6PCh. 27 - Prob. 7PCh. 27 - Prob. 8PCh. 27 - Prob. 9PCh. 27 - Prob. 10PCh. 27 - Boisjoly Watch Imports has agreed to purchase...Ch. 27 - Prob. 12PCh. 27 - Prob. 13PCh. 27 - Prob. 14PCh. 27 - Prob. 1MCCh. 27 - Prob. 2MCCh. 27 - Prob. 3MCCh. 27 - Prob. 4MCCh. 27 - Prob. 5MCCh. 27 - Prob. 6MCCh. 27 - Prob. 7MCCh. 27 - Prob. 8MCCh. 27 - Prob. 9MCCh. 27 - Prob. 10MCCh. 27 - Prob. 11MC
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- Assume that interest rate parity holds. In both the spot market and the 90-day forward market, 1 Japanese yen equals 0.0088 dollar. In Japan, 90-day risk-free securities yield 4.4%. What is the yield on 90-day risk-free securities in the United States? Do not round intermediate calculations. Round your answer to two decimal places.arrow_forwardToday, $1 = 1.82 Euro and $1 = 130 Korean Won. In the 90-day forward market, $1 = 1.84 Euro and $1 = 127 Korean Won. Which of the following statements is most correct when interest rate parity holds? Interest rates on 90-day risk-free U.S. securities are higher than the interest rates on 90-day risk-free Euro securities. Since interest rate parity holds, interest rates should be the same in all three countries. Interest rates on 90-day risk-free U.S. securities are higher than the interest rates on 90-day risk-free Korean securities. Interest rates on 90-day risk-free U.S. securities equal the interest rates on 90-day risk-free Korean securities.arrow_forwardAssuming that interest rate parity holds. In both the spot market and the 90 day forward market, 1 Japanese ye equals .0089 dollar. In Japan, 90-day risk free securities yield 4.3%. What is the yield on 90-day risk free securities in the US? Do not round intermediate calculations. Round your answer to two decimals places.arrow_forward
- Assume that interest rate parity holds and that 90-day risk-free securities yield 3% in the United States and 3.3% in Germany. In the spot market, 1 euro equals $1.50. What is the 90-day forward rate?arrow_forwardQuantitative Problem: Assume that interest rate parity holds. In the spot market 1 Japanese yen = $0.008, while in the 180-day forward market 1 Japanese yen = $0.0087. 180-day risk-free securities yield 1.25% in Japan. What is the yield on 180-day risk-free securities in the United States? Do not round intermediate calculations. Round your answer to two decimal places.arrow_forwardAssume that interest rate parity holds and that the 90-day risk-free securities yield is 5% in the United States and 5.3% in Germany. In the spot market, 1 euro equals $1.40 (1.4 dollars per euro). What is the 90-day forward rate? rh 1.25% 5.0% rf 1.33% 5.3% Euro 0.7143 $1.40 Spot Rate Forward Rate 1.943396 Is the 90-day forward rate trading at a premium or a discount relative to the spot rate?arrow_forward
- In the spot market, 1 Philippine peso can be exchanged for 2.51 Japanese yen. In the 1-year forward market, 1 Philippine peso can be exchanged for 2.53 Japanese yen. The 1-year, risk-free rate of interest is 5 percent in the Philippines. If interest rate parity holds, what is the yield today on 1-year, risk-free Japanese securities?arrow_forwardAssume that interest rate parity holds and that 90-day risk-freesecurities yield a nominal annual rate of 3% in the United States and a nominal annual rateof 3.5% in the United Kingdom. In the spot market, 1 pound = $1.29.a. What is the 90-day forward rate?b. Is the 90-day forward rate trading at a premium or a discount relative to the spot rate?arrow_forwardAssume that 90-day U.S. securities have a 2.9% annualized interest rate, whereas 90-day Canadian securities have a 3.2% annualized interest rate. In the spot market, 1 U.S. dollar can be exchanged for 1.25 Canadian dollars. If interest rate parity holds, what is the 90-day forward rate exchange between U.S. and Canadian dollars (in terms of Canadian dollars per U.S. dollar)? C$ 1.1258/$1 C$ 1.2509/$1 C$ 1.3760/$1 C$ 1.5637/$1 C$ 1.6637/$1 2. A currency trader observes that in the spot exchange market, 1.00 U.S. dollar can be exchanged for 11.65 Mexican pesos or for 7.213 Danish krone. What is the cross-exchange rate between the peso and the krone; that is, how many pesos would you receive for every krone exchanged?arrow_forward
- a. The spot price of the British pound is currently $1.50. If the risk-free interest rate on 1-year government bonds is 1% in the United States and 2% in the United Kingdom, what must be the forward price of the pound for delivery one year from now?b. How could an investor make risk-free arbitrage profits if the forward price were higher than the price you gave in answer to part (a)? Give a numerical example.arrow_forwardAssume that 90-day U.S. securities have a 2.9% annualized interest rate, whereas 90-day Canadian securities have a 3.2% annualized interest rate. In the spot market, 1 U.S. dollar can be exchanged for 1.25 Canadian dollars. If interest rate parity holds, what is the 90-day forward rate exchange between U.S. and Canadian dollars (in terms of Canadian dollars per U.S. dollar)? C$ 1.1258/$1 C$ 1.2509/$1 C$ 1.3760/$1 C$ 1.5637/$1 C$ 1.6637/$1arrow_forwardAssume that 90-day U.S. securities have a 4.5% annualized interestrate whereas 90-day Swiss securities have a 5% annualized interestrate. In the spot market, 1 U.S. dollar can be exchanged for 1.2Swiss francs. If interest rate parity holds, what is the 90-dayforward rate exchange between U.S. dollars and Swiss francs?(0.8323 $ per SFr or 1.2015 SFr per $)arrow_forward
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