Clayton Moore's Money Fund. Clayton Moore is the manager of an intemational money market fund managed out of London. Unlike many money funds that guarantee their investors a near risk-free investment with variable interest eamings, Clayton Moore's fund is a very aggressive fund that searches out relatively high-interest earnings around the globe, but at some risk. The fund is pound-denominated. Clayton is currently evaluating a rather interesting opportunity in Malaysia. Since the Asian Crisis of 1997, the Malaysian government enforced a number of currency and capital restrictions to protect and preserve the value of the Malaysian ringgit. The ringgit was fixed to the U.S. dollar at RM3.80/$ for seven years. In 2005, the Malaysian government allowed the currency to float against several major currencies. The current spot rate today is RM3.13482/S. Local currency time deposits of 180-day maturities are earning 8.896% per annum. The London eurocurrency market for pounds is yielding 4.203% per annum on similar 180-day maturities. The current spot rate on the British pound is $1.5823/£, and the 180-day forward rate is $1.5558/E. The initial investment is £1,000,000.00. The investment proceeds from the initial investment is £ (Round to two decimal places.) The return on the 180-day investment is %. (Round to three decimal places.) If Clayton Moore invests in the Malaysian ringgit deposit, and accepts the uncovered risk associated with the RM/$ exchange rate (managed by the govemment), and sells the dollar proceeds forward, he should expect a return of V% on his 180-day pound investment. This is V than the % per annum he can earn in the euro-pound market. (Round the percentage to three decimal places and select from the drop-down menus.)
Clayton Moore's Money Fund. Clayton Moore is the manager of an intemational money market fund managed out of London. Unlike many money funds that guarantee their investors a near risk-free investment with variable interest eamings, Clayton Moore's fund is a very aggressive fund that searches out relatively high-interest earnings around the globe, but at some risk. The fund is pound-denominated. Clayton is currently evaluating a rather interesting opportunity in Malaysia. Since the Asian Crisis of 1997, the Malaysian government enforced a number of currency and capital restrictions to protect and preserve the value of the Malaysian ringgit. The ringgit was fixed to the U.S. dollar at RM3.80/$ for seven years. In 2005, the Malaysian government allowed the currency to float against several major currencies. The current spot rate today is RM3.13482/S. Local currency time deposits of 180-day maturities are earning 8.896% per annum. The London eurocurrency market for pounds is yielding 4.203% per annum on similar 180-day maturities. The current spot rate on the British pound is $1.5823/£, and the 180-day forward rate is $1.5558/E. The initial investment is £1,000,000.00. The investment proceeds from the initial investment is £ (Round to two decimal places.) The return on the 180-day investment is %. (Round to three decimal places.) If Clayton Moore invests in the Malaysian ringgit deposit, and accepts the uncovered risk associated with the RM/$ exchange rate (managed by the govemment), and sells the dollar proceeds forward, he should expect a return of V% on his 180-day pound investment. This is V than the % per annum he can earn in the euro-pound market. (Round the percentage to three decimal places and select from the drop-down menus.)
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
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Transcribed Image Text:Clayton Moore's Money Fund. Clayton Moore is the manager of an intemational money market fund managed out of London. Unlike many money funds that guarantee their investors a near risk-free investment with variable interest eamings,
Clayton Moore's fund is a very aggressive fund that searches out relatively high-interest earnings around the globe, but at some risk. The fund is pound-denominated. Clayton is currently evaluating a rather interesting opportunity in Malaysia.
Since the Asian Crisis of 1997, the Malaysian government enforced a number of currency and capital restrictions to protect and preserve the value of the Malaysian ringgit. The ringgit was fixed to the U.S. dollar at RM3.80/$ for seven years. In
2005, the Malaysian government allowed the currency to float against several major currencies. The current spot rate today is RM3.13482/$. Local currency time deposits of 180-day maturities are earning 8.896% per annum. The London
eurocurrency market for pounds is yielding 4.203% per annum on similar 180-day maturities. The current spot rate on the British pound is $1.5823/£, and the 180-day forward rate is $1.5558 / E. The initial investment is £1,000,000.00.
The investment proceeds from the initial investment is £. (Round to two decimal places.)
The return on the 180-day investment is %. (Round to three decimal places.)
If Clayton Moore invests in the Malaysian ringgit deposit, and accepts the uncovered risk associated with the RM/$ exchange rate (managed by the government), and sells the dollar proceeds forward, he should expect a return of
V% on
his 180-day pound investment. This is
V than the
v% per annum he can earn in the euro-pound market. (Round the percentage to three decimal places and select from the drop-down menus.)
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