1 a firm can swap floating dollar payment for fixed euro, Ask an Expert

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1. A firm can swap floating dollar payment for fixed euro receipts by combining both 1) paying LIBOR-$ and receiving a fixed amount in Euros and 2) paying a fixed amount in Euros and receiving LIBOR-€

A. True

B. False

2. Take the following quotes and determine the maximum amount of triangular arbitrage profit possible stating with $100,000 and making one trip around the triangle

----------------------------------------ASKS BIDS------------------------------------------------

Deutsche Bank: ----------------> £.784/€ £.781/€

Barclays:---------------------------> £.783/ £.780/ €

Deutsche Bank:----------------> $1.547/£ $1.541/£

Barclays:-------------------------> $1.548/£ $1.542/£

Deutsche Bank:----------------> €.8025/$. €.7950/ $

Barclays:--------------------------> €.8055/$ € .7945/ $

3. Assume the following information:

You have $1,000,000 to invest

Current spot rate of pound = 1.6000

90-day forward rate of pound = 1.5901

3-month deposit rate in U.S.= 3% (periodic rate)

3-month deposit rate in U.K.= 8% (periodic rate)

If you use covered interest arbitrage for a 90-day investment, what will be the amount of U.S. dollars you will have after 90 days?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92748936

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