Risk management and derivativesthe treasurer of a large, Ask an Expert

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RISK MANAGEMENT AND DERIVATIVES

The treasurer of a large Canadian company has $ 30 million Canadian dollars to invest During three months. The effective monthly interest rate in Canada and Great Britain is 0.31% and 0.34%, respectively.

The current exchange rate of £ 0.573 / $ 1 and the forward price (F0) of £ / $ for one Maturity of 3 months is £ 0.575 / $ 1.

A) In which country should the treasurer invest the company's funds?

(Further information: Ignore Transaction costs)

B) Is there an opportunity for arbitration? If so, why and how can we benefit? If not, Why?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M93061361

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