A US COMPANY HAS $10,000 IN CASH AVAILABLE FOR 45 DAYS. IT CAN EAR...

27. - BT THANH TOÁN QUỐC TẾ GLOBAL CORPORATE FINANCE DAP AN
Toán BT THANH TOÁN QUỐC TẾ GLOBAL CORPORATE FINANCE DAP AN
27. A US company has $10,000 in cash available for 45 days. It can earn 1 percent on 45-day investment in the United States. Alternatively, if it converts the US dollars to Singapore dollars, it can earn 1.5 percent on a Singapore deposit for 45 days. The spot rate of the Singapore dollar is US$0.50. The spot rate 45 days from now is expected to be US$0.40. Should this company invest its cash in the United States or in Singapore? * A. in the United States B. in Singapore C. it does not make any difference D. all of the above E. none of the above Solution: US investment earns 1 percent. Percentage change in Singapore dollar= ($0.40 - $0.50)/$0.50 = -20%. Singapore investment loses 18.8 percent: [(1 + 0.015)(1 + (-0.20)] - 1 = -18.8%.