Question

Question 2 2 pts Your firm has $141,000 dollars sitting around that it won't need for the next six months. You could buy a bond here in the US and earn 0.9% interest or you could invest in Singapore and earn 1.4%. If the spot rate is 1.419SGD/USD and the forward rate is 1.5915GD/USD how much more will you earn investing in Singapore than in America? To do this, calculate your earnings both ways and subtract your US earnings from your Singapore earnings. Your answer may be negative. Answer to the nearest penny. I recommend using the box method. Question 3 2 pts What are the differences between forward and futures contracts?

Answer 1

Firm have = $141,000

Bond interest rate in US = 0.9% = 0.009

Bond interest rate in Singapore = 1.4% = 0.014

Current exchange rate = 1.419SGD per USD

Forward exchange rate = 1.591SGD per USD

If you invest $141,000 in US, amount after 6 months will be $141,000 * 1.009 = $141,126.9

or If you convert this $141,000 USD in SGD, that would be $141,000 * 1.419 = 200,079 SGD which would earn 1.4%. Amount after 6 month = 200,079 SGD * 1.014 = 202,880.1 SGD. This amount can be converted back to USD, thus (202,880.1 / 1.591) = 127,517.4USD

Difference between Singapore earning and US earning = 127,517.4USD - 141,126.9 USD = -13,609.5USD