Please explain with simple steps and in depth. Thankyou QUESTION 1 (a) Assume the following...
50.1K
Verified Solution
Link Copied!
Question
Finance
Please explain with simple steps and in depth. Thankyou
QUESTION 1 (a) Assume the following information: 30-day Singapore interest rate = 4% 30-day Malaysian interest rate = 3% 30-day forward rate of Malaysian ringgit = SGD0.350 Spot rate of Malaysian ringgit = SGD0.355 Assume that Tiger Ltd in Singapore will need RM500,000 in 30 days. It wishes to hedge this payables position. Would it be better off using a forward hedge or a money market hedge? Substantiate your answer with estimated costs for each type of hedge.
(b) Assume the following information: You have $1,000,000 to invest Current spot rate of pound = $1.60 90 day forward rate of pound = $1.57 3 month deposit rate in U.S. = 3% 3 month deposit rate in U.K. = 4% If you use covered interest arbitrage for a 90 day investment, what will be the amount of U.S. dollars you will have after 90 days?
(c) Assume the bid rate of a Singapore dollar is $.40 while the ask rate is $.41 at Bank A. Assume the bid rate of a Singapore dollar is $.42 while the ask rate is $.425 at Bank B. Given this information, what would be your gain if you use $1,000,000 and execute locational arbitrage? That is, how much will you end up with over and above the $1,000,000 you started with?
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
