The treasurer of a major U.S. firm has $43,129,609 to invest for three months. The annual interest rate in the United States is 0.37% per month. The interest rate in Great Britain is 0.56% per month. The spot exchange rate is £0.7, and the three-month forward rate is £0.74. Ignoring transaction costs, what would be the NPV of investing in Great Britain as opposed to invest in the U.S.?
The treasurer of a major U.S. firm has $43,129,609 to invest for three months. The annual interest rate in the United States is 0.37% per month. The interest rate in Great Britain is 0.56% per month. The spot exchange rate is £0.7, and the three-month forward rate is £0.74. Ignoring transaction costs, what would be the NPV of investing in Great Britain as opposed to invest in the U.S.?
Chapter20: Short-term Financing
Section: Chapter Questions
Problem 3BIC
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The treasurer of a major U.S. firm has $43,129,609 to invest for three months. The annual interest rate in the United States is 0.37% per month. The interest rate in Great Britain is 0.56% per month. The spot exchange rate is £0.7, and the three-month forward rate is £0.74. Ignoring transaction costs, what would be the NPV of investing in Great Britain as opposed to invest in the U.S.?
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