Suppose That You Are the Treasurer of IBM with an Extra

question 52

Multiple Choice

Suppose that you are the treasurer of IBM with an extra U.S.$1,000,000 to invest for six months.You are considering the purchase of U.S.T-bills that yield 1.810% (that's a six month rate,not an annual rate) and have a maturity of 26 weeks.The spot exchange rate is $1.00 = ¥100,and the six month forward rate is $1.00 = ¥110.What must the interest rate in Japan (on an investment of comparable risk) be before you are willing to consider investing there for six months?

• A)1.991 percent
• B)1.12 percent
• C)7.45 percent
• D)−7.45 percent

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