Assignment:
Q1. How can a firm such as Ajax Steel in Peoria, Illinois, utilize the eurodollar market to minimize its financing costs? This firm is a medium-size manufacturer with no foreign sales.
Q2. Assume that the interest rate on 12-month US dollar deposits in London is currently 2.6875 per cent per year and the rate on British pound deposits there is 4.1875 per cent per year. The spot exchange rate is US $1.93/pound. What do you expect the exchange rate to be in one year?
Provide complete and step by step solution for the question and show calculations and use formulas.