The current spot exchange rate between Swiss franc and the U.S. dollar is $1.077/SF and the three-month forward rate is $1.1334/SF. The speculator believes that in three months the spot rate will be $1.120/SF. Explain how the speculator with 1,000.000$ (one million U.S. dollars) should speculate in the forward market and calculate the profit to be made. Please provide a full explanation.
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- The current spot exchange rate between Swiss franc and the U.S. dollar is $1.077/SF and the three-month forward rate is $1.1334/SF. The speculator believes that in three months the spot rate will be $1.120/SF. Explain how the speculator with 1,000.000$ (one million U.S. dollars) should speculate in the forward market and calculate the profit to be made. Please provide a full explanation.
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- Suppose a British investor is expected to receive payment of 150,000 dollars ($) in twelve months from a U.S. bank. The annual interest rate in dollar deposit is 5% and the annual interest rate in pound deposit is 10%. If the present exchange rate is 0.50 pound per dollar deposit and interest parity holds, then. (a) How many pounds does the British investor expect to receive at the maturity date of his U.S. investment? (Show the computation process). (b) How many pounds were initially invested? Fully explain all your answers (calculation).A Palestinian resident can earn 3 percent interest on a one-year bank deposit of $50,000 at home. Alternatively, he can convert the $50,000 into euros and earn 4 percent on a one-year bank deposit in France. If the exchange rate is initially 0.90 euros per dollar and then changes to 0.89 euros per dollar in one-year, which deposit would have given him a higher return?If one U.S. dollar is traded on the foreign exchange market for about 0.89 euros, then one euro can purchase about U.S. dollars. a) 0.75 b) 1.12 c) 1.75 d) 0.89
- Suppose the U.S. dollar interest rate is 3%, while the interest rate in the United Kingdom is 6%. Your friend thinks he can convert his dollars, invest in the United Kingdom and convert his pounds back into dollars at the end of a year, allowing him to make a higher return than investing in dollars. Assuming uncovered interest parity (UIP) holds, explain why he is incorrect.Suppose you are a British venture capitalist holding a major stake in an e-commerce start-up in Silicon Valley. As a British resident, you are concerned with the pound value of your U.S. equity position. Assume that if the American economy booms in the future, your equity stake will be worth $901, and the exchange rate will be $1.28/£. If the American economy experiences a recession, on the other hand, your American equity stake will be worth $817, and the exchange rate will be $1.43/£. You assess that the American economy will experience a boom with a 50 percent probability and a recession with the remaining probability.Estimate the expected value of the property in GBP (as XXX.XXX)Assume you are a trader with Deutsche Bank. From the quote screen on your computer terminal, you notice that Dresdner Bank is quoting EUR/USD at 1.2459 and Credit Suisse is offering USD/CHF at 0.8850. You learn that UBS is making a direct market between the Swiss franc and the euro, with a current EUR/CHF of 1.1048. (Ignore bid-ask spreads for this problem.) Assume you have $5,000,000 with which to conduct the arbitrage. What is the EUR/CHF rate that eliminate triangular arbitrage? (X.XXXX)
- In France, one kilogram of macadamia nuts costs 10.5Euro and 10 Dollars in Canadian in Canada. According to the law of one price, the expected exchange rate between the Euro and the Canadian would be_____ 1.5Euro/$ 0.12Dollar/Euro 1.67 Dollar/Euro 0.67 Euro/DollarLet’s suppose you (USA dealer) imported a product from German on Dec 1, 2018 at € 300, payable in 60 days. You sold the product in the US market at $400 in cash on Dec 15, 2018. The company's fiscal year ends on Dec 31. You paid to your German supplier on Feb 1, 2019. Below, please find the exchange rate information: Dec 1, 2018: 0.8 €/$.. Dec 31, 2018: 1.5 €/$. Feb 1, 2019: 0.6 €/$. What was net income for 2018 and 2019, respectively? Group of answer choices -$200, -$100 -$100, $200 $300, -$200 $200, -$300Given the following data: R = $1.00/Y100 F = $1.00/Y95 i u.s. = 5%. If the interest parity condition is expected to hold, interest rates in Japan (Japan) should equal % (enter your answer as a percentage rounded to two decimal places).
- At the start of 1996, the annual interest rate was 8 percent in the United States and 4.8 percent in Japan. The exchange rate was 110 yen per dollar at the time. Mr. Jorus, who is the manager of a Bermuda-based hedge fund, thought that the substantial interest advantage associated with investing in the United States relative to investing in Japan was not likely to be offset by the decline of the dollar against the yen. He thus concluded that it might be a good idea to borrow in Japan and invest in the United States. At the start of 1996, in fact, he borrowed ¥1,000 million for one year and invested in the United States. At the end of 1996, the exchange rate became 120 yen per dollar. How much profit did Mr. Jorus make in dollar terms?On August 8, 2000, Zimbabwe changed the value of the Zimbabwe dollar from Z$38∕US$ to Z$50∕US$. (a) What was the original U.S. dollar value of the Zimbabwe dollar? What is the new U.S. dollar value of the Zimbabwe dollar? (b) By what percentage has the Zimbabwe dollar devalued (revalued) relative to the U.S. dollar? (c) By what percentage has the U.S. dollar appreciated (depreciated) relative to the Zimbabwe dollar?Suppose that on June 13, 2019, an ornamental bookcase handmade in Canada is priced at CAD 1,120. The approximate U.S. dollar price of the bookcase would be If the nominal exchange rate for the U.S. dollar-euro falls from $1.3457 to $1.07656 per euro, the euro in value, or relative to the U.S. dollar.