QUESTION 3(a)KL Co. will be paying USD100,000.00 in 60 days. Assume the following interestrates:U.S.Malaysia360-day borrowing rate360-day deposit rate7%6%5%4%Assume the forward rate of the USD is RM4.20 and the spot rate of the USD isRM4.15. If KL Co. uses a money market hedge, how much will KL Co. be payingin 60 days? (b)Assume you can borrow $100,000.00, using covered interest arbitrage for a 30-day investment, calculate the arbitrage profit in the amount of U.S. dollars after30 days.Current spot rate of Euro30-day forward rate of EuroBorrowing rate in United StatesDeposit rate in Germany$1.15$1.174.10% p.a.4.15% p.a.I| || ||||

Given, (b) Here, we have to find out the arbitrage value after 30 days. The working is done…

(b) Assume you can borrow $100,000.00, using covered interest arbitrage for a 30- day investment, calculate the arbitrage profit in the amount of U.S. dollars after 30 days. Current spot rate of Euro 30-day forward rate of Euro Borrowing rate in United States Deposit rate in Germany S1.15 $1.17 4.10% p.a. 4.15% p.a. II || ||||

(b) Assume you can borrow $100,000.00, using covered interest arbitrage for a 30- day investment, calculate the arbitrage profit in the amount of U.S. dollars after 30 days. Current spot rate of Euro 30-day forward rate of Euro Borrowing rate in United States Deposit rate in Germany S1.15 $1.17 4.10% p.a. 4.15% p.a. II || ||||

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter27: Multinational Financial Management

Section: Chapter Questions

Problem 7MC

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