The treasurer of a major U.S. firm has $38 million to invest for three months. The interest rate in the United States is .55 percent per month. The interest rate in Great Britain is .59 percent per month. The spot exchange rate is £.76, and the three-month forward rate is £77. Ignore transaction costs. a. If the treasurer invested the company's funds in the U.S., how much would the investment be worth after three months? Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89. b. If the treasurer invested the company's funds in Great Britain, how much would the investment be worth after three months in U.S. dollars? Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89. a. U.S. investment b. Great Britain investment

International Financial Management
14th Edition
ISBN:9780357130698
Author:Madura
Publisher:Madura
Chapter20: Short-term Financing
Section: Chapter Questions
Problem 3BIC
Question
The treasurer of a major U.S. firm has $38 million to invest for three months. The interest rate in the United States is .55 percent per
month. The interest rate in Great Britain is .59 percent per month. The spot exchange rate is £.76, and the three-month forward rate is
£77. Ignore transaction costs.
a. If the treasurer invested the company's funds in the U.S., how much would the investment be worth after three months?
Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal
places, e.g., 1,234,567.89.
b. If the treasurer invested the company's funds in Great Britain, how much would the investment be worth after three months in
U.S. dollars?
Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal
places, e.g., 1,234,567.89.
a. U.S. investment
b. Great Britain investment
Transcribed Image Text:The treasurer of a major U.S. firm has $38 million to invest for three months. The interest rate in the United States is .55 percent per month. The interest rate in Great Britain is .59 percent per month. The spot exchange rate is £.76, and the three-month forward rate is £77. Ignore transaction costs. a. If the treasurer invested the company's funds in the U.S., how much would the investment be worth after three months? Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89. b. If the treasurer invested the company's funds in Great Britain, how much would the investment be worth after three months in U.S. dollars? Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89. a. U.S. investment b. Great Britain investment
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
International Financial Management
International Financial Management
Finance
ISBN:
9780357130698
Author:
Madura
Publisher:
Cengage