suppose you have $1 million to invest. You are considering to invest in UK first, then convert

Fantastic news! We've Found the answer you've been seeking!

Question:

suppose you have $1 million to invest.

You are considering to invest in UK first, then convert the British Pound back to US$ in the future.

You know following information:

Annual Interest rate on investment in US: 2%

Annual Interest rate on investment in UK: 4%

Investment period: 1 year

Current exchange rate: 1.48 $/BP

Forward exchange rate which you can apply when converting BP to US$: 1.47 $/BP

What would be profit if you apply the covered-interest arbitrage?

Related Book For answer-question

Spreadsheet Modeling & Decision Analysis A Practical Introduction to Management Science

ISBN: 978-0324656633

5th edition

Authors: Cliff T. Ragsdale

See More Books

Posted Date: Jun 09, 2023 03:24 AM

See More Questions

KYC's stock price can go up by 15 percent every year, or down by 10 percent. Both outcomes are equally likely. The risk free rate is 5 percent, and the current stock price of KYC is 100. (a) Price a...
The Crazy Eddie fraud may appear smaller and gentler than the massive billion-dollar frauds exposed in recent times, such as Bernie Madoffs Ponzi scheme, frauds in the subprime mortgage market, the...
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
where a bank's liabilities can be withdrawn in the short-term while its assets are being repaid in the long-term.
A supply of steam at 14.7 lbf/in. 2, 320 F is needed in a hospital for cleaning purposes at a rate of 30 lbm/s, a supply of steam at 20 lbf/in.2, 500 F is available from a boiler and tap water at...
A certain hydrocarbon had the molecular formula C16H26 and contained two triple bonds. Ozonolysis gave CH3 (CH2)4CO2H and HO2CCH2CH2CO2H as the only products. Suggest a reasonable structure for this...
What the differences are between civil litigation and other types of litigation
Model 99 Hotels is considering the construction of a new hotel for $80 million. The expected life of the hotel is 20 years with no residual value. The hotel is expected to earn revenues of $15...
BeGone manufactures spray cans of insect repellent. On August 1, the company had 13,720 units in the beginning WIP Inventory that were 100 percent complete as to canisters, 60 percent complete as to...
Valley Pizzas owner bought his current pizza oven two years ago for $9,000, and it has one more year of life remaining, lie is using straight-line depreciation for the oven. He could purchase a new...
numbers ar for which f(z) is a real number. v(t) 321 O t -2- -3- 67 A particle is moving along the z-axis with position z(t) at time t, for 0 t 10. At time t = 6, the particle is at position z=-3....
Calculate operating working capital. Cash 8 1 , 5 9 7 . 4 Investments 9 , 9 9 0 . 1 Inventory 1 1 7 , 2 9 8 . 4 Receivables 1 0 8 , 0 6 7 . 5 Prepaid expenses 2 8 , 5 4 3 . 0 Other current assets 1 0...
Find the absolute maximum and absolute minimum of f(x) = x on each of the following intervals; a) [-1,1] b) [1, 5] c) [-5,5]
Sketch the electric field lines around an electric dipole. Consider 5 negative charges and 3 positive charges all of the same magnitude placed near one another. Sketch the electric field lines around...
Find the area of the surface generated when the given curve is revolved about the y-axis. The part of the curve y=10x-5 between the points (1,5) and (2,15) SA= (Type an exact answer in terms of .)
Chatgpt has had an impact on markets and business competition, as well as on the economy. Please share your views on the following questions. (a). What is ChatGPT? What are the potential economic...
Describe how predictive analytics can be used as part of a solution to a business problem with reference to ONE real-world case study of your own choice. Describe how prescriptive analytics can be...
AB CORPORATION ISSUED THE FOLLOWING 850 COMMON STOCKS PAR VALUE P100 750 PARTICIPATING PREFERRED STOCKS PAR VALUE P100 AT 3% AB CORPORATION DECLARED P100,000.00 DIVIDEND IN 2022.
Vinton Auto Insurance is trying to decide how much money to keep in liquid assets to cover insurance claims. In the past, the company held some of the premiums it received in interest-bearing...
A furniture manufacturer has warehouses in cities represented by nodes 1, 2, and 3 in Figure. The values on the arcs indicate the per unit shipping costs required to transport living room suites...
Compute the two-period and four-period moving average predictions for the data set. a. Prepare a line graph comparing the moving average predictions against the original data. b. Do the moving...
On May 1, 1999 you were engaged by a committee of shareholders to perform a special audit as of December 31, 1998, of the shareholders' equity of the Major Corporation, whose stock is actively traded...
The following covenants are extracted from the indenture of a bond issue. Although the bond due date is 2016, failure to comply with any covenant automatically advances the due date of the loan to...
Following are errors, frauds, or other circumstances that an auditor might encounter as a result of applying audit tests to capital stock as of December 31, the balance sheet date: a. Shareholders'...

suppose you have $1 million to invest. You are considering to invest in UK first, then convert

Question:

Expert Answer:

SOLUTION To calculate the profit from coveredinterest arbitrage we need to compare the returns on in... View the full answer

Spreadsheet Modeling & Decision Analysis A Practical Introduction to Management Science

Students also viewed these finance questions