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Unformatted text preview: ି଼/ଵଶ 200*ሺ1 2.9%ሻ ିଵଵ/ଵଶ ൌ 1101.949 Question #2: R ୡୀ 2.5% 1.32ሺ6% െ 2.5%ሻ ൌ 7.12% Since the project is labeled as risky, you would expect a return greater than the 7.12% rate of return expected by the shareholders (market) Question #3: Scenario (1): Invest $1(CAD) at CAD risk ‐ free rate ܨ ൌ 1 כ ݁ ଷ% Scenario (2): Invest $.93(USD) at USD risk ‐ free rate and convert it to CAD at the end of the year F = .ଽଷכ భ.ఱ% ி To avoid arbitrage both investment should have the same value: 1 כ ݁ ଷ% = .ଽଷכ భ.ఱ% ி FX = .916 USD/CAD The proposed bail ‐ out package is going to cost the US government a lot of money and lead to higher inflation in the US, leading to a higher risk ‐ free rate. This would have the effect of weakening the USD and thus the USD/CAD FX rate would increase....
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- Fall '09
- Y.Lawrynshyn
- 1.00%, 1 %, 1 1%, T‐bill price
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