This topic contains a solution. Click here to go to the answer

Author Question: You have some money on deposit in a bank account which pays a nominal (or quoted) rate of 8.0944 ... (Read 178 times)

jenna1

  • Hero Member
  • *****
  • Posts: 568
You have some money on deposit in a bank account which pays a nominal (or quoted) rate of 8.0944 percent, but with interest compounded daily (using a 365 day year). Your friend owns a security which calls for the payment of 10,000 after 27 months.
 
  The security is just as safe as your bank deposit, and your friend offers to sell it to you for 8,000. If you buy the security, by how much will the effective annual rate of return on your investment change?
  A) 1.87
  B) 1.53
  C) 2.00
  D) 0.96
  E) 0.44

Question 2

The current direct quote in New York is .01075 dollars per yen. Suppose the current direct quote in Tokyo is 91
  yen per dollar.
 
  What is the appropriate indirect quote in New York? What will arbitrageurs do to eliminate the
  differential rates in these markets?



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

mariahkathleeen

  • Sr. Member
  • ****
  • Posts: 337
Answer to Question 1

C

Answer to Question 2

Indirect quote in New York = 1/.01075 = 93.023 yen per dollar.
Arbitrageurs will buy yen in New York where the price is .01075 dollars per yen and sell yen in Tokyo where the price
is .01099 dollars per yen. The increase in demand in New York will increase the price while the selling pressure in
Tokyo will lower the price.




jenna1

  • Member
  • Posts: 568
Reply 2 on: Jul 10, 2018
Gracias!


aliotak

  • Member
  • Posts: 326
Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

 

Did you know?

Human neurons are so small that they require a microscope in order to be seen. However, some neurons can be up to 3 feet long, such as those that extend from the spinal cord to the toes.

Did you know?

The largest baby ever born weighed more than 23 pounds but died just 11 hours after his birth in 1879. The largest surviving baby was born in October 2009 in Sumatra, Indonesia, and weighed an astounding 19.2 pounds at birth.

Did you know?

The B-complex vitamins and vitamin C are not stored in the body and must be replaced each day.

Did you know?

Carbamazepine can interfere with the results of home pregnancy tests. If you are taking carbamazepine, do not try to test for pregnancy at home.

Did you know?

More than one-third of adult Americans are obese. Diseases that kill the largest number of people annually, such as heart disease, cancer, diabetes, stroke, and hypertension, can be attributed to diet.

For a complete list of videos, visit our video library