Questions from Financial Management

Q: What are the advantages and disadvantages to a U.S.

What are the advantages and disadvantages to a U.S. corporation that uses currency options on euros rather than a forward contract on euros to hedge its exposure in euros? Explain why an MNC might use...

Q: Assume that the euro’s spot rate has moved in cycles over time

Assume that the euro’s spot rate has moved in cycles over time. How might you try to use futures contracts on euros to capitalize on this tendency? How could you determine whether such a strategy woul...

Q: Assume that the transactions listed in the first column of the following

Assume that the transactions listed in the first column of the following table are anticipated by U.S. firms that have no other foreign transactions. Place an “X” i...

Q: Assume that on November 1, the spot rate of the British

Assume that on November 1, the spot rate of the British pound was $1.58 and the price on a December futures contract was $1.59. Assume that the pound depreciated during November so that by November 30...

Q: Why do you think the depreciation of the Asian currencies adversely affected

Why do you think the depreciation of the Asian currencies adversely affected U.S. firms? (There are at least three reasons, each related to a different type of exposure of some U.S. firms to exchange...

Q: Assume that a March futures contract on Mexican pesos was available in

Assume that a March futures contract on Mexican pesos was available in January for $0.09 per unit. Also assume that forward contracts were available for the same settlement date at a price of $0.092 p...

Q: LSU Corp. purchased Canadian dollar call options for speculative purposes.

LSU Corp. purchased Canadian dollar call options for speculative purposes. If these options are exercised, LSU will immediately sell the Canadian dollars in the spot market. Each option was purchased...

Q: How can corporations use currency futures? b. How can speculators

How can corporations use currency futures? b. How can speculators use currency futures?

Q: Auburn Co. has purchased Canadian dollar put options for speculative purposes

Auburn Co. has purchased Canadian dollar put options for speculative purposes. Each option was purchased for a premium of $0.02 per unit, with an exercise price of $0.86 per unit. Auburn Co. will purc...

Q: Bama Corp. has sold British pound call options for speculative purposes

Bama Corp. has sold British pound call options for speculative purposes. The option premium was $0.06 per unit, and the exercise price was $1.58. Bama will purchase the pounds on the day the options a...