Questions from Corporate Finance

Q: Some forecasters believe that foreign exchange markets for the major floating currencies

Some forecasters believe that foreign exchange markets for the major floating currencies are “efficient” and forward exchange rates are unbiased predictors of future spot exchange rates. What is meant...

Q: Define the following terms: a. The law of one

Define the following terms: a. The law of one price. b. Absolute purchasing power parity. c. Relative purchasing power parity.

Q: Explain how a nominal effective exchange rate index is constructed.

Explain how a nominal effective exchange rate index is constructed.

Q: What are the main advantages that Trident gains by developing a multinational

What are the main advantages that Trident gains by developing a multinational presence?

Q: A newspaper shows the following prices for the previous day’s trading in

A newspaper shows the following prices for the previous day’s trading in the U.S. dollar-euro currency futures: What do the above terms indicate?

Q: Give an example of a transaction exposure that arises from borrowing in

Give an example of a transaction exposure that arises from borrowing in a foreign currency.

Q: What is the basic difference between a put on British pounds sterling

What is the basic difference between a put on British pounds sterling and a call on sterling?

Q: You read that exchange-traded American call options on pounds sterling

You read that exchange-traded American call options on pounds sterling having a strike price of 1.460 and a maturity of next March are now quoted at 3.67. What does this mean if you are a potential bu...

Q: What happens to the premium you paid for the above option in

What happens to the premium you paid for the above option in the event you decide to let the option expire unexercised? What happens to this amount in the event you decide to exercise the option?

Q: You have the same information as in question 4 above, except

You have the same information as in question 4 above, except that the pricing is for a European option. What is different? Information from Question 4: A newspaper shows the following prices for the...