Maurice Tutor

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    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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    Phoniex University
    Oct-2001 - Nov-2016

Category > Management Posted 08 Apr 2018 My Price 5.00

Turkish lira

Assume that annual interest rates are 9 percent in the United States and 8 percent in Turkey. An FI can borrow (by issuing CDs) or lend (by purchasing CDs) at these rates. The spot rate is $0.6584/Turkish lira (TL).

 

a.

If the forward rate is $0.6735/TL, how could the bank arbitrage using a sum of $9 million? What is the spread earned? (Do not round intermediate calculations. Round your answer to 4 decimal places. (e.g., 32.1616))

 

  Spread earned %

 

b.

At what forward rate is this arbitrage eliminated? (Do not round intermediate calculations. Round your answer to 5 decimal places. (e.g., 32.16161))

 

  Forward rate /TL  

Answers

Maurice Tutor
(5)
Status NEW Posted 08 Apr 2018 06:04 AM My Price 5.00

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