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The percentage change in the spot rates of the Canadian dollar

The percentage change in the spot rates of the Canadian dollar 



1. Financing With a Portfolio. Raleigh Corp. needs to borrow funds for one year to finance an
expenditure in the United States. The following interest rates are available:
Borrowing Rate
U.S. 10%
Canada 6%
Japan 5%
The percentage change in the spot rates of the Canadian dollar and Japanese yen over the next year
are as follows:
Canadian Dollar Japanese Yen
Percentage Change Percentage Change
Probability in Spot Rate Probability in Spot Rate
10% 5% 20% 6%
90% 2% 80% 1%
If Raleigh Corporation borrows a portfolio, 50 percent of funds from Canadian dollars and 50
percent of funds from yen, determine the probability distribution of the effective financing rate of
the portfolio. What is the probability that Raleigh will incur a higher effective financing rate from
borrowing this portfolio than from borrowing U.S. dollars?

2. Using a spreadsheet, compute the expected amount (in U.S. dollars) that will be remitted back to
the U.S. in six months if Blades finances its working capital requirements by borrowing baht
versus borrowing yen. Based on your analysis, should Blades obtain a yen- or baht-denominated
loan?





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13 Apr 2016

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  1. Genius

    The percentage change in the spot rates of the Canadian dollar

    The percentage change in the spot rates of the Canadian dollar The percenta ****** ******
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