The treasurer of a major U.S. firm has $37 million to invest for three months. T
ID: 2714733 • Letter: T
Question
The treasurer of a major U.S. firm has $37 million to invest for three months. The interest rate in the United States is .54 percent per month. The interest rate in Great Britain is .58 percent per month. The spot exchange rate is £.75, and the three-month forward rate is £.76. Ignore transactions costs. (Enter your answer as directed, but do not round intermediate calculations.)
If the treasurer invested the company's funds in the U.S., how much would the investment be worth after three months? (Enter your answer in dollars, not millions of dollars (e.g., 1,234,567). Round your answer to 2 decimal places (e.g., 32.16).)
If the treasurer invested the company's funds in Great Britain, how much would the investment be worth after three months in U.S. dollars? (Enter your answer in dollars, not millions of dollars (e.g., 1,234,567). Round your answer to 2 decimal places (e.g., 32.16).)
In which country would the treasurer want to invest the company’s funds?
The treasurer of a major U.S. firm has $37 million to invest for three months. The interest rate in the United States is .54 percent per month. The interest rate in Great Britain is .58 percent per month. The spot exchange rate is £.75, and the three-month forward rate is £.76. Ignore transactions costs. (Enter your answer as directed, but do not round intermediate calculations.)
Explanation / Answer
Solution:
(a)
(b)
(2)
The treasurer wants to invest in U.S as the amount recevied after 3 months is more in case of investing in U.S rather than in Great Britain.
Funds to invest in U.S. 37,000,000 Interest Per month 0.54% Interest after 3 months 199,800 Total Value of investment = Funds + Interest for 3 months 37,199,800 Amount 37,199,800Related Questions
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