The treasurer of a major u. s. firm has $39 million to invest for three months. the interest rate in the united states is .56 percent per month. the interest rate in great britain is .60 percent per month. the spot exchange rate is £.77, and the three-month forward rate is £.78. ignore transaction costs. if the treasurer invested the company's funds in the u. s., how much would the investment be worth after three months? (enter your answer in dollars, not millions of dollars, e. g., 1,234,567. do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.) amount $ if the treasurer invested the company's funds in great britain, how much would the investment be worth after three months in u. s. dollars? (enter your answer in dollars, not millions of dollars, e. g., 1,234,567. do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.) amount $

The treasurer of major US funds is planning to invest the $39 million either in US Market or Great Britain Market as the interest rate in Great Britain is more.

IF THE TREASURER INVESTS IN US MARKET:

STEP 1:

Amount to be invested (PV) : $39,000,000

Rate of interest (per month) (i%) : 0.56%

Number of months for investment (n) : 3 Months.

Future Value of investment after 3 Months (FV) : ?

STEP 2: INSERT THE VARIABLES IN THE FV FORMULA

FV = 39,000,000 × (1 + 0.0056)³

FV = 39,000,000 × 1.016894256

FV = $39,658,875.97

The investment would be worth $39,658,875.97 if invested in US Market

IF THE AMOUNT IS INVESTED IN GREAT BRITAIN

STEP 1 : Since the amount is in dollars, in order to invest in Great Britain it has to be first converted into pounds (£)

Spot Rate: £0.77 per US Dollar

Amount to be converted: $39,000,000

Amount in Pounds (£) : £30,030,000

STEP 2: The dollar converted into pounds will be invested in the Great Britain at 0.60% for 3 Months.

Amount to be invested : £30,030,000

Rate: 0.60%

N : 3

FV = £30,030,000 * (1+0.0060)³

FV = £30,573,789.73

STEP 3: The treasurer gets £30,573,789.73 if invested in Great Britain, since this amount is in pounds (£), the same needs to be converted into US dollar

3 month Forward Rate : £0.78 per US Dollar

Amount to be converted into Dollars: £30,573,789.73

Amount in US Dollars: £30,573,789.73 ÷ 0.78 = $39,197,166.32

Thus, the treasurer gets $39,197,166.32 if invested in Great Britain

it should be

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