b. There is $500,000 to invest. U.S is offering a 60-day interest rate of 6 percent per annum, while Malaysia is giving

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B There Is 500 000 To Invest U S Is Offering A 60 Day Interest Rate Of 6 Percent Per Annum While Malaysia Is Giving 1 (104.26 KiB) Viewed 34 times

b. There is $500,000 to invest. U.S is offering a 60-day interest rate of 6 percent per annum, while Malaysia is giving 12 percent per annum for a tenure of 60 days. The spot rate of Ringgit Malaysia (RM) is $0.110 and the forward rate is $0.108. Ignoring all the tax effects, Would an American investor or Malaysian investor benefit from this arbitrage? (20 marks) Agnes is a speculator in investing in options. Agnes had purchased a put option on Australian dollar with a strike price of $0.80. the premium is $0.02. on the expiration date, the Australian dollar spot rate is $0.74. i. Should Agnes exercise the option on this date or just let the option expire? (2 marks) ii. Calculate Agnes's net profit per unit (3 marks) iii. Calculate the net profit per unit to the seller of this put option (3 marks) d. Suppose that, as of April 4,2021 a futures contract specifying 500,000 Mexican pesos and a June settlement date is priced at $0.09. On April 4, speculators who expect the peso to decline sell futures contracts on pesos. Assume that, on June 17 (the settlement date), the spot rate of the peso is $0.08. What should the speculator do? (6 marks) e. You can buy a euro for 14 pesos. The bank will pay you 13 pesos for a euro. You can buy a U.S. dollar for 0.9 euros. The bank will pay you 0.8 euros for a U.S. dollar. You can buy a U.S. dollar for 10 pesos. The bank will pay you 9 pesos for a U.S. dollar. You have $1,000. Is generating profit possible and if so, explain the order of the transactions that you would execute and the profit that you would earn. If you cannot earn a profit, explain why. (8 marks)