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Intro You have $11,000 to invest and observe the following interest rates and exchange rates:...

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Accounting

Intro

You have $11,000 to invest and observe the following interest rates and exchange rates:

Annual interest rates Deposit rate Loan rate
Dollar 4.8% 5.5%
Ruble 6.1% 7%
Exchange rates Bid Ask
Ruble spot $0.018 $0.019
Ruble 1-year forward $0.02 $0.021

Part 1

How many rubles will you get from converting your dollars?

Part 2

How many rubles will you have after depositing them at a Russian bank for one year?

Part 3

How many dollars will you get from selling your rubles at the one year forward rate?

Part 4

What is your risk-free rate of return (yield) from exploiting the higher interest rate in Russia?

Answer & Explanation Solved by verified expert
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