An investor is examining exchange rates in London and New York. For simplicity, all rates are quoted versus the U.S. dollar. In New York: the euro rate is $1.25 and the Yen rate is 110 Yen. In London: the euro rate is $1.20 and the Yen rate is 105 Yen. If you were looking to buy euro, where would you buy it?

answer

watching

views

For unlimited access to Homework Help, a Homework+ subscription is required.

You have 0 free answers left.
Get unlimited access to 3.8 million step-by-step answers.

Get unlimited access

Already have an account? Log in

Collen VonLv2

28 Sep 2019

Unlock all answers

Get 1 free homework help answer.

Already have an account? Log in

Related questions

Bank A has purchased a 2.5 million one-year Euro loan that pays 10% interest annually. The spot rate of U.S. dollars for Euros is 1.20. It has funded this loan by accepting a yen-denominated deposit for the equivalent amount and maturity at an annual rate of 4%. The current spot rate of U.S. dollars for Japanese yen is .0085.

a. What is the loan amount in dollars?

b. What is the deposit amount in yen?

c. What is the interest income earned in dollars on this one-year transaction if the spot rate of U.S. dollars for Euro and U.S. dollars for yen at the end of the year are 1.25 and .0080, respectively?

d. What is the interest expense in dollars?

aquamarineclam523

Bank One has purchased a 2.5 million one-year Euro loan that pays 10% interest annually. The spot rate of U.S. dollars for Euros is 1.20. It has funded this loan by accepting a yen-denominated deposit for the equivalent amount and maturity at an annual rate of 4%. The current spot rate of U.S. dollars for Japanese yen is .0085.

a. What is the loan amount in dollars?

b. What is the deposit amount in yen?

d. What is the interest expense in dollars?

coffeetoad602

3. One year ago, an American investor bought 8000 shares of London Bridges at a price of Â£34 (or 34 UK pounds) per share when the exchange rate was $1.2/1Â£ (or $1.20 dollars = 1 pound). The investor also invested 10,000,000 Japanese Yen in a money market fund in Japan last year when the exchange rate was 110 Yen = $ 1 US. (a) Using current exchange rates, what is todayâs value of the investorâs portfolio in U.S. dollars if the UK investment decreased 10% (in the local currency) and the Japan investment increased 1% (in local currency)? (b) What is the overall rate of return on the portfolio over the last year?

Note: I would prefer the problem be solved using excel. Please be sure to show all work and formulas.

carminesalmon877

Weekly leaderboard

Home

Homework Help 3,900,000

Finance 370,000