Explore BrainMass

Explore BrainMass

    Internal Rate and Arbitrage

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    18-7. Interest Rates and Arbitrage. The treasurer of a major U.S. firm has $30 million
    to invest for three months. The annual interest rate in the United States is .30 percent
    per month. The interest rate in Great Britain is .45 percent per month. The spot
    exchange rate is £.59, and the three-month forward rate is £.61. Ignoring
    transaction costs, in which country would the treasurer want to invest the company's
    funds? Why?

    © BrainMass Inc. brainmass.com March 4, 2021, 6:18 pm ad1c9bdddf

    Solution Preview

    If invested in US, the treasurer will get $30*1.009=$30.27 milliom

    If invested in GB ...

    Solution Summary

    The problem helps with a problem involving internal rate and arbitrage.