Assume That Instead of Investing in Euro Bonds at a Fixed

question 51

Multiple Choice

Assume that instead of investing in Euro bonds at a fixed rate of 6.5 percent, the FI invests them in variable rates of LIBOR + 1.5 percent, reset every six months. The current LIBOR rate is 5 percent. LIBOR at the end of six months is 5.5 percent. Assume both interest and principal will be reinvested in six months. Assume the spot exchange rate is €1.75/$. What should be the one-year forward rate in order for the bank to earn a spread of 1 percent?

• A)€1.7344/$.
• B)€1.7418/$.
• C)€1.7478/$.
• D)€1.7750/$.
• E)€1.7842/$.

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Definitions:

White Blood Cells

Cells of the immune system that defend the body against infectious disease and foreign materials.

Immature Red Blood Cell

An early stage in the development of red blood cells, not yet fully matured or functional.

RIA

Stands for Radioimmunoassay, a sensitive laboratory technique used to measure concentrations of substances, such as hormones, in the blood.

Acid Stain

A coloring technique used in microscopy to identify and differentiate among various types of cells and tissues, often using acidic dyes.