Questions from Corporate Finance

Q: Assume an investor takes a €100,000 short position in

Assume an investor takes a €100,000 short position in the six‐month euro forward contract with forward rate of C$1.50 per euro. Determine the investor ’ s profit (loss) if the spot rate in six months...

Q: The spot exchange rate is C$1.4665 per euro

The spot exchange rate is C$1.4665 per euro, while the six‐month forward rate is C$1.50 per euro. Suppose a firm has to pay a foreign supplier €100,000 in six months and decides to eliminate its forei...

Q: The spot exchange rate is C$1.4665 per euro

The spot exchange rate is C$1.4665 per euro, while the six‐month forward rate is C$1.50 per euro. Suppose a firm expects to receive €100,000 in six months from a foreign customer and decides to elimin...

Q: CanComp has a contract to deliver a large computer system to a

CanComp has a contract to deliver a large computer system to a South African company in one year and would like to hedge the currency risk. CanComp will receive payment of R3.5 million (the currency o...

Q: Explain the difference between forwards and futures.

Explain the difference between forwards and futures.

Q: Explain basis risk and the advantage of forward contracts over future contracts

Explain basis risk and the advantage of forward contracts over future contracts in minimizing basis risk.

Q: Ethel and Egbert have decided to invest in the futures market.

Ethel and Egbert have decided to invest in the futures market. Both entered into 1,000 futures contracts, which required a $30,000 initial margin. The maintenance margin for each investor is $22,500....

Q: An investor enters into a long position in 50,000 futures

An investor enters into a long position in 50,000 futures contracts that require a $50,000 initial margin and have a maintenance margin that is 75 percent of this amount. The futures price associated...

Q: An investor enters into a short position in 50,000 futures

An investor enters into a short position in 50,000 futures contracts that require a $50,000 initial margin and have a maintenance margin that is 75 percent of this amount. The futures price associated...

Q: You have observed the following monthly returns for ABC and DEF.

You have observed the following monthly returns for ABC and DEF. a. Graph the relationship between the weight in ABC and the portfolio returns (restrict all weights to be greater than or equal to zero...