Alfa Company can borrow $20 million at 6% annualized. It can use proceeds to invest in Canadian dollars at 8% annualized over a six-day period. The Canadian dollar is worth $ 0.85 and is expected to be worth $ 0.80. Based on this information, should Alfa Company borrow US dollars and invest in Canadian dollars? What would be the gain or loss in US dollars?
January 07, 2023
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Alfa Company can borrow $20 million at 6% annualized. It can use proceeds to invest in Canadian dollars at 8% annualized over a six-day period. The Canadian dollar is worth $ 0.85 and is expected to be worth $ 0.80. Based on this information, should Alfa Company borrow US dollars and invest in Canadian dollars? What would be the gain or loss in US dollars?
Math
