This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: You have some money on deposit in a bank account which pays a nominal (or quoted) rate of 8.0944 ... (Read 130 times)

jenna1

  • Hero Member
  • *****
  • Posts: 568
on: Jul 10, 2018
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
Reply #1 on: Jul 10, 2018
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
:D TYSM

komodo7

  • Member
  • Posts: 322
Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

« previous next »
 

Did you know?

According to the American College of Allergy, Asthma & Immunology, more than 50 million Americans have some kind of food allergy. Food allergies affect between 4 and 6% of children, and 4% of adults, according to the CDC. The most common food allergies include shellfish, peanuts, walnuts, fish, eggs, milk, and soy.

Did you know?

Limit intake of red meat and dairy products made with whole milk. Choose skim milk, low-fat or fat-free dairy products. Limit fried food. Use healthy oils when cooking.

Did you know?

Eating food that has been cooked with poppy seeds may cause you to fail a drug screening test, because the seeds contain enough opiate alkaloids to register as a positive.

Did you know?

Multiple experimental evidences have confirmed that at the molecular level, cancer is caused by lesions in cellular DNA.

Did you know?

The toxic levels for lithium carbonate are close to the therapeutic levels. Signs of toxicity include fine hand tremor, polyuria, mild thirst, nausea, general discomfort, diarrhea, vomiting, drowsiness, muscular weakness, lack of coordination, ataxia, giddiness, tinnitus, and blurred vision.

Static Stability & Environmental Lapse Rate Static Stability & Environmental Lapse Rate
How to convert units of any rate to another (Part 2) How to convert units of any rate to another (Part 2)
Determining the order and rate constant of an irreversible first-order reaction Determining the order and rate constant of an irreversible first-order reaction
Wind, solar, biomass, and geothermal power account for less than 1% of global power generation Wind, solar, biomass, and geothermal power account for less than 1% of global power generation
You make 4 semi-annual deposits starting at $350 and increasing at a constant rate of 2.14%. ... You make 4 semi-annual deposits starting at $350 and increasing at a constant rate of 2.14%. ...
The rate of replacement of a recessive allele d by the dominant allele D by mutation alone. Even tho The rate of replacement of a recessive allele d by the dominant allele D by mutation alone. Even tho
Video: Insulin (glucose uptake by body cells), glycogenesis and lipogenesis

For a complete list of videos, visit our video library