Q: “Last year we had a substantial income in sterling, which
“Last year we had a substantial income in sterling, which we hedged by selling sterling forward. In the event sterling appreciated. So our decision to sell forward cost us a lot of money. I think that...
See AnswerQ: Carpet Baggers, Inc., is proposing to construct a new bagging
Carpet Baggers, Inc., is proposing to construct a new bagging plant in a country in Europe. The two prime candidates are Germany and Switzerland. The forecasted cash flows from the proposed plants are...
See AnswerQ: Alpha and Omega are U.S. corporations. Alpha has
Alpha and Omega are U.S. corporations. Alpha has a plant in Hamburg that imports components from the United States, assembles them, and then sells the finished product in Germany. Omega is at the oppo...
See AnswerQ: Look at Table 27.1. a. How many
Look at Table 27.1. a. How many Japanese yen do you get for your dollar? b. What is the one-month forward rate for yen? c. Is the yen at a forward discount or premium on the dollar? d....
See AnswerQ: Define each of the following theories in a sentence or simple equation
Define each of the following theories in a sentence or simple equation: a. Interest rate parity. b. Expectations theory of forward rates. c. Purchasing power parity. d. International capital marke...
See AnswerQ: “Northern Refineries does not avoid risk by selling oil futures.
“Northern Refineries does not avoid risk by selling oil futures. If prices stay above $2.40 a gallon, then it will actually have lost by selling oil futures at that price.” Is this a fair comment?
See AnswerQ: In March 1997, the exchange rate for the Indonesian rupiah was
In March 1997, the exchange rate for the Indonesian rupiah was R2,419 = $1. Inflation in the year to March 1998 was about 30% in Indonesia and 2% in the United States. a. If purchasing power parity h...
See AnswerQ: A U.S. company has committed to pay 10 million
A U.S. company has committed to pay 10 million kronor to a Swedish company in one year. What is the cost (in present value) of covering this liability by buying kronor forward? The Swedish interest ra...
See AnswerQ: A firm in the United States is due to receive payment of
A firm in the United States is due to receive payment of €1 million in eight years’ time. It would like to protect itself against a decline in the value of the euro, but finds it difficult to get forw...
See AnswerQ: Airlux Antarctica has current assets of $300 million, current liabilities
Airlux Antarctica has current assets of $300 million, current liabilities of $200 million and a crash—sorry—cash ratio of .05. How much cash and marketable securities does it hold?
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