Need Help in Solving a case Study in Finance

deleto

New member
Dear All,

Hope you are fine.

Can anyone please help me solving the below case study?;
ـــــــــــــــــــــــــــ
Speculation. Blue Demon Bank expects that the Mexican peso will depreciate against the dollar from its spot rate of USD.15 to USD.14 in 10 days. The following interbank lending and borrowing rates exist:

Lending Rate Borrowing Rate
U.S. dollar (USD) 8.0% 8.3%
Mexican peso (MXN) 8.5% 8.7%

Assume that Blue Demon Bank has a borrowing capacity of either USD10 million or 70 million pesos in the interbank market, depending on which currency it wants to borrow.

a. How could Blue Demon Bank attempt to capitalize on its expectations without using deposited funds? Estimate the profits that could be generated from this strategy.

b. Assume all the preceding information with this exception: Blue Demon Bank expects the peso to appreciate from its present spot rate of USD.15 to USD.17 in 30 days. How could it attempt to capitalize on its expectations without using deposited funds? Estimate the profits that could be generated from this strategy.
ــــــــــــــــــــــــــــــ

Thanks,

Sedky A.
 

rosemarry2

MP Guru
Dear All,

Hope you are fine.

Can anyone please help me solving the below case study?;
ـــــــــــــــــــــــــــ
Speculation. Blue Demon Bank expects that the Mexican peso will depreciate against the dollar from its spot rate of USD.15 to USD.14 in 10 days. The following interbank lending and borrowing rates exist:

Lending Rate Borrowing Rate
U.S. dollar (USD) 8.0% 8.3%
Mexican peso (MXN) 8.5% 8.7%

Assume that Blue Demon Bank has a borrowing capacity of either USD10 million or 70 million pesos in the interbank market, depending on which currency it wants to borrow.

a. How could Blue Demon Bank attempt to capitalize on its expectations without using deposited funds? Estimate the profits that could be generated from this strategy.

b. Assume all the preceding information with this exception: Blue Demon Bank expects the peso to appreciate from its present spot rate of USD.15 to USD.17 in 30 days. How could it attempt to capitalize on its expectations without using deposited funds? Estimate the profits that could be generated from this strategy.
ــــــــــــــــــــــــــــــ

Thanks,

Sedky A.

Hey friend,

Here i am sharing International Research Journal of Applied Finance, so please download and check it.
 

Attachments

  • International Research Journal of Applied Finance.pdf
    2.8 MB · Views: 0
Top