The treasurer of a major U.S. firm has $25 million to invest for three months. T

Question

The treasurer of a major U.S. firm has $25 million to invest for three months. The interest rate in The United States is 0.25 percent per month. The interest rate in Great Britain is 0.30 percent per month. The spot exchange rate is 0.625, and the Three-month forward rate is 0.628. What would be the value of the investment if the money is invested in U.S and Great Britain? (Enter your answer in thousands of dollars, not n millions. (e.g., 1,234,567). Round your answer to 2 decimal places. (e.g., 32.16)) U.S. $ Great Britain $

Explanation / Answer

US Amount Available in $               25,000,000.00 Interest rate in US per Month 0.25% Interest rate for 3 Months Value of Investment = 25,000,000*1.0025*1.0025*1.0025               25,187,969.14 Britain Amount Available in $               25,000,000.00 Converted into Pound = 25m*.625               15,625,000.00 Interest rate in Britain per Month 0.30% Interest rate for 3 Months Value of Investment = 15,625,000*1.003*1.003*1.003               15,766,047.30 Converted into$ = 15766,047.30/.628               25,105,170.85 Note : We have assumed That it is compounded Monthly in Absence of information

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