Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. an australian company is considering a three month

An Australian company is considering a three month short-term investment of 10,000AUD in either Australia...

80.2K

Verified Solution

Question

Finance

An Australian company is considering a three month short-term investment of 10,000AUD in either Australia or Switzerland. The following information is available

Initial spot exchange rate (AUD/CHF) 1.0775-1.0825

Australian three month LIBOR rate (deposit loan) 4.75-5.25% p.a.

Swiss three month LIBOR rate (deposit loan) 2.25-2.75% p.a.

US three month LIBOR rate (deposit loan) 1.25-2.15% p.a.

Australian lending/borrowing spread +1.5%p.a.

Swiss lending/borrowing spread +0.5%p.a.

US lending/borrowing spread +0.2%p.a.

WACC for company 15%

Required:

(a) If the ending spot exchange rate (AUD/CHF) is expected to be 1.0875-1.0925, which financing option should be taken.

(b) If the ending spot exchange rate turned out to be (AUD/CHF) 1.0675-1.0725, would your decision have been profitable.

(c) Determine the profit or loss from your decision.

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Statistics
1.2K views

Every semester, I would like for more than 75% of my students to score a 70...

Chemistry
1.2K views

A) An aqueous solution is 3.50% by mass hydrochloric acid, HCl, and has a density of 1.02...

Advance Math
1.2K views

There lays a 10x10 square grid in front of Claire and she is instructed to stand...

Finance
1.2K views

Discuss the advantages and disadvantages to a young employee of the following options for retirement planning:...

Basic Math
1.2K views

23 Flying Distance The bearing from A to C is S 52 E The bearing...

Basic Math
1.2K views

Given the below cost and revenue formulas find the company s profit if 22 000...

Statistics
1.2K views

2 3 4 5 6 7 8 The correlation coefficient Choose one appropriate because Choose...

Calculus
1.2K views

a Find the average value of f x x 3 on the interval 2 5...

Calculus
1.2K views

0 89 Points DETAILS Consider the following graph Domain 6 Range 4 2 y 6...

Accounting
1.2K views

Which do you think is a more effective process for decision making? Have you worked...

Accounting
1.2K views

MARINA Company reports the following for 2020 of Sales Revenue: $10,000,000 Cost of Sales: $1,500,000...

Accounting
1.2K views

MS Corporation, a calendar year C corporation, has (1) gross income from operations $200,000, (2)...