XYZ bank of US expects the Swiss franc to appreciate against the dollar from its current spot rate of$.66467 to $.73114 in 60 days. The following rates are available in the interbank market. All rates arecompounded daily on a 360 days /year basis.LENDING RATE5.55.2BORROWING RATE6.05.8U.S.SwitzerlandAssume that the bank has a borrowing capacity of either $10m or SF 15m in the interbank market.Estimate possible profits from this exercise.

KYZ bank of US expects the Swiss franc to appreciate against the dollar from its current spot rate of $.66467 to $.73114 in 60 days. The following rates are available in the interbank market. All rates are compounded daily on a 360 days /year basis. BORROWING RATE 6.0 J.S. Switzerland 5.8 Assume that the bank has a borrowing capacity of either $10m or SF 15m in the interbank market. LENDING RATE 5.5 5.2

KYZ bank of US expects the Swiss franc to appreciate against the dollar from its current spot rate of $.66467 to $.73114 in 60 days. The following rates are available in the interbank market. All rates are compounded daily on a 360 days /year basis. BORROWING RATE 6.0 J.S. Switzerland 5.8 Assume that the bank has a borrowing capacity of either $10m or SF 15m in the interbank market. LENDING RATE 5.5 5.2

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

Problem 1PS

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29) XYZ bank of US expects the Swiss franc to appreciate against the dollar from its current spot rate of $.66467 to $.73114 in 60 days. The following rates are available in the interbank market. All rates are compounded daily on a 360 days /year basis. LENDING RATE 5.5 5.2 BORROWING RATE 6.0 5.8 U.S. Switzerland Assume that the bank has a borrowing capacity of either $10m or SF 15m in the interbank market. Estimate possible profits from this exercise. 0.66 4671 60
The forward rate of the Swiss franc is $0.50. The spot rate of the Swiss franc is $0.48. The following interest rates exist: U.S. Switzerland 360-day borrowing rate 7% 5% 360-day deposit rate 6% 4% You need to purchase SF200,000 in 360 days. If you use a money market hedge, the amount of dollars you need in 360 days is ______. A. $101,904 B. $101,923 C. $96,914 D. $98,770
Below is the information regarding U.S. and Canadian annualized interest rates: Currency Lending Rate Borrowing Rate U.S Dollar ($) 6.73% 7.20% Euro (€) 6.80% 7.28% Note: Spot rate of Euro is $1.13 An international bank can borrow either 20 million U.S. dollars or 20 million euro. The bank expects the spot rate of the euro is $1.10 in 90 days, which is equal to ______ profit. A. $583,800 B. $588,200 C. $584,245 D. $579,845
EUROCREDIT LOAN:A Swiss sporting goods company borrows in yen in the Eurocredit market at a rate of 4.94 percent from Bank of America using a three-month rollover loan. Bank of America assigns a default risk premium of 1.93 percent on the loan, and the country risk is an additional 0.76 percent. The bank can borrow funds in the Euromarket at the three-month LIBOR rate of 0.30 percent. What is Bank of America’s gross profit margin on this loan?
MSN Bank expects that the New Zealand dollar (NZD) will depreciate against the U.S. dollar (USD) from its spot rate of $.44 to $.41 in 90 days. The following interbank lending and borrowing rates exist: Annual borrowing rate Annual lending rate USD 7.20% 7.00% NZD 10.00% 9.00% MSN Bank considers borrowing 2 million New Zealand dollars in the interbank market and investing the funds in U.S. dollars for 90 days. Estimate the profits (or losses) that could be earned from this strategy. Should MSN Bank pursue this strategy? Show necessary calculations and discuss (50 words excluding calculations).
MSN Bank expects that the New Zealand dollar (NZD) will depreciate against the U.S. dollar (USD) from its spot rate of $.44 to $.41 in 90 days. The following interbank lending and borrowing rates exist: Annual borrowing rate Annual lending rate USD 7.20% 7.00% NZD 10.00% 9.00% MSN Bank considers borrowing 2 million New Zealand dollars in the interbank market and investing the funds in U.S. dollars for 90 days. Estimate the profits (or losses) that could be earned from this strategy. Should MSN Bank pursue this strategy? Show necessary calculations and discuss.
a. The Mexican peso (MXN) is expected to decline against the dollar in the next 10 days, according to BBVA Bancomer, from its current spot rate of USDO.1500 to USDO.1400. There are the following rates for interbank lending and borrowing: Currency Lending Rate Borrowing Rate US Dollar (USD) 8.00% 8.30% Mexican Peso (MXN) 8.50% 8.70% Assume BBVA Bancomer has a borrowing capacity of USD10 million or MXN70 million in the interbank market, depending on which currency it wishes to borrow. Determine how BBVA Bancomer might capitalise on its projections without utilising deposited money and earn potential profit from this approach.
Bank of Maldives expects that Maldives Rufiyaa (MVR) will appreciate against Bangladeshi Taka (BDT) from its spot rate of 5.50 to 5.70 in 45 days. The following annual interbank lending and borrowing rates exist: Country Lending Rate Borrowing Rate Maldives 10.70% 11.50% Bangladesh 5.50% 6.50% Assume Bank of Maldives has a borrowing capacity of either 1 million MVR or 5 million BDT in the interbank market, depending on which currency it wants to borrow. How could Bank of Maldives attempt to capitalize on its expectations without using deposited funds? Estimate the profits that could be generated from this strategy. (Show all necessary calculations and the steps in this speculation strategy).
Assume the following information regarding U.S. and European annualized interest rates: Currency U.S. Dollar ($) 4.5% Investment Rate Borrowing Rate 5.5% Euro (€) 5.1% 6.3% Golden R Inc. can borrow either $6 million or €5 million. The current spot rate of the euro is $1.02. Furthermore, Golden R Inc. expects the spot rate of the euro to be $1.35 in 60 days. What is Golden R. Inc.'s dollar profit from speculating if the spot rate of the euro is indeed $1.35 in 60 days? Your answer should be whole US dollars. No decimals.
The following information on interest rates and exchange rates is available to all with access to any of the finance data providers: Currency Spot 1 Month 3 Months 6 Months 12 Months Euro 2.0310/20 22/18 64/54 128/105 227/228 GBP* 1.4890/00 55/22 160/156 302/289 560/523 Yen 154.20/30 8/6 33/27 75/62 164/137 The quote for the British Pound (GBP) is AUD per GBP. For the Euro and Yen it is foreign currency per AUD. For most currency pairs, a point is 1/100th of 1% (i.e., 0.0001); the Japanese Yen currency pair is the only exception to this rule. Swap points for Japanese Yen currency pairs (e.g., Yen per AUD) are quoted to two decimal places only, so one point is 1/100. The table below provides bid and ask interest rates on the Australian dollar (AUD), the Euro, the British Pound (GBP) and the Japanese Yen. These rates are quoted on a per annum basis. Currency 1 Month 3 Months 6 Months 12 Months AUD 5.6785-5.8125 5.5000-5.6250 5.5000-5.6250 5.6250-5.7500 Euro 4.4375-4.5625 4.3125-4.4375…
DePaul International Bank is a U.S. bank that wants to speculate on the dollar-euro exchange rate. A euro (€) costs $1.08 today. The bank expects it to cost $1.12 in 4 months. Current annual interest rates are as follows: Currency Borrowing rate Lending rate Euro 4.8% 4.1% U.S. dollar 7.5% 6.6% The bank doesn't want to use any of its own money, but could borrow either $10,000,000 or €10,000,000. Assume there are 30 days in every month and 360 days per year. Ignore compounding when working with the interest rates. Part 1 What is the expected profit from the trade after 4 months (in $)?
Blue Demon Bank expects that the Mexican peso will depreciate against the dollar from its spot rate of $0.15 to $0.12 in 10 days. The following interbank lending and borrowing rates exist: Assume that Blue Demon Bank has a borrowing capacity of either $10 million or 70 million pesos in the interbank market, depending on which currency it wants to borrow. Assume 360 days in year for your calculations. Do not round intermediate calculations. Round your answers to the nearest dollar. How could Blue Demon Bank attempt to capitalize on its expectations without using deposited funds? Estimate the profits that could be generated from this strategy. Blue Demon Bank can capitalize on its expectations by borrowing (DOLLARS OR PESOS) , converting it to (DOLLARS OR PESOS), lending the (DOLLARS OR PESOS), and repaying to (DOLLARS OR PESOS) loan. The expected profit is $ BLANK? Assume all the preceding information with this exception: Blue Demon Bank expects the peso to appreciate from its present…

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