QUESTION TWO (a) A USA bank faces the following market conditions. 3 months certificate of deposit...
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QUESTION TWO (a) A USA bank faces the following market conditions. 3 months certificate of deposit (CD) rate is 18%p.a. The federal deposit insurance stand at 0.037%. the federal CD reserve requirement is 6%. The 3 months Euro dollar bid rate is 22% p.a. Explain the difference between inward and outward arbitrage. Determine whether an outward or inward arbitrate exists. How much profit would the bank make from the arbitrage. (ii) (iii) (4 Marks) (4 Marks) (2 Marks) (b) Explain any FIVE internal hedging techniques for a MNC which desires to cover itself (10 Marks) against potential forex losses. QUESTION TWO (a) A USA bank faces the following market conditions. 3 months certificate of deposit (CD) rate is 18%p.a. The federal deposit insurance stand at 0.037%. the federal CD reserve requirement is 6%. The 3 months Euro dollar bid rate is 22% p.a. Explain the difference between inward and outward arbitrage. Determine whether an outward or inward arbitrate exists. How much profit would the bank make from the arbitrage. (ii) (iii) (4 Marks) (4 Marks) (2 Marks) (b) Explain any FIVE internal hedging techniques for a MNC which desires to cover itself (10 Marks) against potential forex losses.
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The detailed answer for the above question is provided below i Inward Arbitrage Inward arbitrage is a type of arbitrage that involves taking advantage ... View the full answer
Related Book For
Basic Business Statistics Concepts And Applications
ISBN: 9780132168380
12th Edition
Authors: Mark L. Berenson, David M. Levine, Timothy C. Krehbiel
Posted Date:
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