If the interest rate is 10%, what is the present value of a security that pays you K1,100 next year, K1,210 the year after, and K1,331 the year after that?
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Question 4
- If the interest rate is 10%, what is the
present value of a security that pays you K1,100 next year, K1,210 the year after, and K1,331 the year after that? - Find the investment yield of a 90-day T-bill for K380milion per K400million face value.
3. Explain the repayment schedule of Zambia’s ten-year US$750 million Eurobond issued in 2012
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- Question 4 a.If the interest rate is 10%, what is the present value of a security that pays you K1,100 next year, K1,210 the year after, and K1,331 the year after that? b.Find the investment yield of a 90-day T-bill for K380milion per K400million face value. c.Explain the repayment schedule of Zambia’s ten-year US$750 million Eurobond issued in 2012.QUESTION 3 (a) KL Co. will be paying USD100,000.00 in 60 days. Assume the following interest rates: U.S. Malaysia 360-day borrowing rate 360-day deposit rate 7% 6% 5% 4% Assume the forward rate of the USD is RM4.20 and the spot rate of the USD is RM4.15. If KL Co. uses a money market hedge, how much will KL Co. be paying in 60 days?4.9 Perpetuities An investor purchasing a British consol is entitled to receive annual payments from the British government forever. What is the price of a consol that pays $75 annually if the next payment occurs one year from today? The market rate is 3.1 percent
- A)Find the investment yield of a 90-day T-bill for K380milion per K400million face value. B)Explain the repayment schedule of Zambia’s ten-year US$750 million Eurobond issued in 2012. C)Assume the following spot rates. Year Spot rate 1 3 2 4.5 3 5.5 Calculate the one-year forward rate over the second year. Calculate the one-year forward rate over the third year.Problem 7. Assume that you are a US investor who has available $100,000,000 to invest for six months, and that the six-month interest rate is 5% in the US. In addition you know that the six-month interest rate in Italy is 4%. You also observe the following quotations: spot exchange rate USD 0.99 per 1 EUR and a six-month forward rate USD 1.01 per 1 EUR. Where should you invest to maximize the return of your investment? Explain the role of the appreciation/depreciation of the dollar in your answer. Is this forward rate an equilibrium rate? Let's consider that you are the manager of a multinational corporation that is not willing to be exposed to currency risk: what forward rate would be the equilibrium rate that covers against currency risk, given the same spot and interest rates?Finance The practice of investing in a currency that offers the higher return on a covered basis is known as covered interest arbitrage. Currently, the six month Euro Libor rate is -0.52% per annum, and the six month TR libor rate is 18.06% per annum. If the spot rate is 8.5013TRY per Euro and the forward rates are as stated below, Forward Points EURTRY 1M FWD 1003 EURTRY 3M FWD 3411 EURTRY 6M FWD 7096 EURTRY 1Y FWD 14507 a) What is 6M Forward rate for euro? b) Do you have a covered interest arbitrage opportunity? c) If yes, how? d) How much is the arbitrage amount you can enjoy if you can borrow upto 1 million euros or its equivalent Turkish Lira?
- Tyson Inc. wants to hedge an account receivable of ¥595 million to be received in six months using a money market hedge. Given a yen borrowing rate of 6% APR and a spot exchange rate of ¥119/$ how much is the yen denominated loan Tyson Inc. will need to borrow today worth when converted into dollars? Question 6 options: $4,926,108 $4,716,981 $5,000,000 $4,854,369Question 2 Suppose that you are working for ANZ Bank as a foreign exchange trader and are currently exploring the opportunity of engaging a cover interest arbitrage possibility. You can invest New Zealand Dollar (NZD) 10,000 or British pound (GBP) 10,000. You faced the following exchange rate and interest rate quotes. Sport rate (NZD/GBP) One-year forward rate (NZD/GBP) One-year New Zealand 2.7450-2.7550 2.6450-2.6550 Interest rate 7.75%-8.25% One-year British interest Rate 3.75%-4.25% a) Show how to realize Covered interest arbitrage (CIA), assuming you want to realize in term of NZD and determine the arbitrage profit/losses. b) the arbitrage profit/losses. Assume that you want to realize in term of GBP. Show the CIA process and determineExercise 2 (LO 2) Spot rates and forward rates. On January 1, one U.S. dollar can be exchanged for eight foreign currencies (FC). The dollar can be invested short term at a rate of 4%, and the FC can be invested at a rate of 5%. 2. Calculate the 180-day forward rate to buy FC (assume 365 days per year).
- 5. A U.S. firm expects a receivable (cash inflow) of €1,000,000 in six months. The current exchange rate is $1.125/€. Firm wants to sell euros in six months (to convert the inflow into dollars). Consider 3 possible spot prices in six months. 1. $1.195/€ 2. $1.100/€ 3. $1.025/€ What kind of option, put or call, is appropriate to hedge with? In each scenario, what is the total amount of the firm's NET receivable? NET receivable implies you should consider the receivable as well as the hedging costs of buying the option. (Assume an option exercise price of $1.130/€ and option premium of $.016/€) | 1. 2. 3.4 Assume that Intel has net receivables of SGD1,500,000 in 90 days. The spot rate of the Singapore Dollar (SGD) is USD0.7300, and the Singapore interest rate is 12.00% per annum and US interest rate is at 10.00% per annum. Suggest how the U.S. firm could implement a money market hedge. (Show your strategy and workings).2. Suppose today's exchange rate is $1.23/€. The three-month interest rates on dollars and euros are 6% and 3 % (both anual rates), respectively. The three-month forward rate is $1.25. A foreign exchange advisory service has predicted that the euro will appreciate to $1.27 within three months. Consider 1 million euros. a.. How would you use forward contracts to speculate in the above situation? b. How would you use money market instruments (borrowing and lending) to speculate? C. Which alternatives (forward contracts or money market instruments) would you prefer? Why? d. Can you make profits without risks? If so, explain and calculate how you do that.