Question

Spot rate of C$ $0.90
90-day forward C$ $0.91
90-day Canadian rate 4%

90-day US rate 3.5%

Assuming Jared wants to get a loan for $10,000,000 in one country and invest in the other, how much money could he potentially make?

Answer 1

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ke - Microsoft Excel (Product Activation Failed) Add-Ins View - 2x Dr General Wrap Text Fat Merge Merge & Center - Center Σ AutoSum : A Fill 2 Sort & m Find & st $ $ % % , , .0 .00 :.: Insert Delete Format File Home Insert Page Layout Formulas Data Review % Cut Calibri -11AA = = = Ea Copy Paste BI U D- DA E Format Painter = 5 Clipboard Font YX340 @ foc YP YQ YR YS Conditional Format Formatting as Table Styles Cell Styles 2 Clear Filter Editing Select Alignment Number Cells Y T YU YN YW YN YY EZ ZA 322 323 SPOT RATE FORWARD RATE 0.9 0.91 324 325 326 327 328 329 CANADIAN RATE US RATE 4.00% 3.50% 330 331 332 333 STEP 1 STEP 2 STEP 3 STEP 4 SUPPOSE INVESTOR BORROWS $10000000, PAYABLE AFTER 90 DAYS AT 3.5% AMOUNT IN C$ = 10000000/0.9 = 11111111.11 INVEST IN CANADA = 11111111.12*(1+0.04) = 11555555.56 CONVERT IN DOLLARS = 11555555.56 X 0.91 = 10515555.56 AFTER 90 DAYS, AMOUNT OF DOLLARS = 10515555.56 334 335 336 337 338 STEP 5 PAYMENT AFTER 90 DAYS = 10000000 X 1.035 = 10350000 339 ANSWER: PROFIT FROM TRANSACTION = 165555.56 340 341 342 M convexity DGM betaport future INDEX INTL CAP BUD LEASING PV, FV, ANNUITY DIR right clean YIELD bond portfolio HI Rea KE CAPM UTILITY, SHARPE, beta ferences: GF466 cap stru WACC RESI el BOJ 120% 0- 0 ... B 9 . * ENG 24-11-2019