finance hw

7. MM Corporation invests 1,500,000 South African rand at a nominal interest rate of 10 percent. At the time the investment is made, the spot rate of the rand is $.205. If the spot rate of the rand at maturity of the investment is $.203, what is the effective yield of investing in rand?​ Show all your work and briefly discuss.

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8. To benefit from the low correlation between the Trinidad dollar and the Japanese yen (¥), SIO Corporation decides to invest 50 percent of total funds invested in Trinidad dollars and the remainder in yen. The domestic yield on a one-year deposit is 8 percent. The Trinidad one-year interest rate is 10 percent, and the Japanese one-year interest rate is 7 percent. SIO has determined the following possible percentage changes in the two individual currencies as follows:

a. What is the expected effective yield of the portfolio SIO is contemplating assume the two currencies move independently from one another?​ Show work

b. What is the probability that the yield of the two-currency portfolio is less than the domestic yield?​ Show work

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9. Assume the U.S. one-year interest rate is 5 percent, while the South African one-year interest rate is 13 percent. If a U.S. firm invests in a South African one-year deposit, and the South African rand remains constant over the next year, the U.S. firm will earn an effective yield of? Show and discuss your work.

10. The Mexican one-year interest rate is 9 percent, while the U.S. one-year interest rate is 3 percent. Assume that interest rate parity exists. If a U.S. uses the forward rate to forecast the exchange rate of the peso in one year, the expected effective yield from investing in a one-year deposit in Mexico is? Show and discuss your work.