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Foreign Exchange Rates

Yield on 90-Day Risk-Free Securities: Example Problem

Assume that interest rate parity holds. In both the spot market and the 90-day forward market 1 Japanese yen = 0.0086 dollar. And 90-day risk-free securities yield 4.6% in Japan. What is the yield on 90-day risk-free securities in the United States?

Exchange rate: pesos and dollar

Please see below for the solution on a question regarding foreign exchange rates - pesos and dollars in this case. Provide step by step calculations and detailed explanations. Currently, in the spot market $1 = 106.5 Japanese yen, 1 Japanese yen = 0.0096 euro, and 1 euro = 10.1 Mexican pesos. What is the exchange rate betwee

Computation of conversion of exchange Rate

25. You just returned from some extensive traveling throughout the Americas. You started your trip with $10,000 in your pocket. You spent 1.4 million pesos while in Chile. You spent another 40,000 Bolivars in Venezuela. Then on the way home, you spent 34,000 pesos in Mexico. How many dollars did you have left by the time you ret

Exchange rates

24. You are planning a trip to Australia. Your hotel will cost you A$150 per night for five nights. You expect to spend another A$2,000 for meals, tours, souvenirs, and so forth. How much will this trip cost you in U.S. dollars given the following exchange rates? Country U.S. $ Equivalent Currency per

Tangshan Mining Company to choose optimal capital structure

1. Tangshan Mining Company must choose its optimal capital structure. Currently, the firm has a 40 percent debt ratio and the firm expects to generate a dividend next year of $4.89 per share and dividends are grow at a constant rate of 5 percent for the foreseeable future. Stockholders currently require a 10.89 percent return on

Foreign Exchange and Derivatives

Analyze the impact of the foreign exchange and derivatives markets on Honeywell Inc. and the countries (India and Brazil)in which the Honeywell Inc. is considering expansion. Specifically, describe the impact of exchange rate convertibility, bid-ask spreads, real exchange rates, and the interest rate parity on the relative inves

Foreign exchange

What is meant by foreign exchange risk? What specific problems does foreign exchange present in an organization? How could an organization that needs Euros in six months protect itself from currency fluctuations?

15 Multiple Choice Questions about business combinations.

1. Which of the following is NOT a cost that is typically incurred as part of a business combination: a. Direct Costs b. Research & Development Costs c. Cost of Issuing Securities d. Indirect & General Costs e. None of the above Questions 2&3 refer to the following: Assume that P Company purchases 10 percent of S Compan

Questions Based on Business Combinations

1. Which of the following is not a cost that is typically incurred as part of a business combination: a. Direct Costs b. Research & Development Costs c. Cost of Issuing Securities d. Indirect & General Costs e. None of the above Questions 2&3 refer to the following: Assume that P Company purchases 10 percent of S Co

Consolidation: Multiple choice accounting Questions.

1. Which of the following is NOT a cost that is typically incurred as part of a business ombination: a. Direct Costs b. Research & Development Costs c. Cost of Issuing Securities d. Indirect & General Costs e. None of the above Questions 2&3 refer to the following: Assume that P Company purchases 10 percent of S Com

Three most critical issues for IBM in the next five years

You have been summoned by the CEO of IBM to explain what you believe are the 3 most critical issues in global management that will affect IBM company in the next 5 years. Explain the issues and your recommendations as to the best course of action for IBM to thrive in the global marketplace that it finds itself.

Interest Rate Parity: Borrow or lend in US vs the UK

Suppose the interest rate on 1-year loans in the United States is 3 percent while in the United Kingdom the interest rate is 5 percent. The spot exchange rate is $1.87/£ and the 1-year forward rate is $1.84/£. In what country would you choose to borrow? To lend? Can you profit from this situation?

Managing Currency Risk for General Gadget's coconut scrapers

General Gadget Corp. (GGC) is a U.S.-based multinational firm that makes electrical coconut scrapers. These gadgets are made only in the United States using local inputs. The scrapers are sold mainly to Asian and West Indian countries where coconuts are grown. a. If GGC sells scrapers in Trinidad, what is the currency risk fa

Rate of return

Ann purchased stock in a German firm at a price per share of 101.28 euros when the US $/euro exchange rate was $1.023. After six months, Ann sold the stock for 103.40 euros when the US $/euro exchange rate was $0.987. The stock does not pay a dividend. What is Ann's rate of return on this investment?

Taft Company Acquiring the Assets of Vikix, Inc.

On January 1, 20X5, Taft Company acquired all of the outstanding stock of Vikix, Inc., a Norwegian company at a cost of $151,200. Vikix's net assets on the date of acquisition were 700,000 kroner (NKr). On January 1, 20X5, the book and fair values of the Norwegian subsidiary's identifiable assets and liabilities approximated the

Pfizer and their accounting exposure

Pfizer operating in over 100 countries around the world, they conduct their financial operations in many currencies. Talk about the accounting exposure from their global operation.

Recent Fed Actions

Objective: ?Describe the role of the Federal Reserve in the economy and in regulation of financial services. Task: In this part of the project, you need to collect data about recent monetary actions. In your report, you need to: ?Determine the decision-making process and conduct of monetary policy. ?Analyze how a recomm

Exchange Rate: US, Japan and Australian

Consider the following exchange rate U.S Dollars required to buy one unit of Foreign Currency Japanese yen 0.009 Australian dollars 0.650 1. Are these currency prices direct quotation or indirect quotations? 2. Calculate the indirect quotation for the Japanese yen and Australian dollars. 3. Calculate the two cross rate

What is the Current Rate for Risk-Free Japanese Securities?

The nominal rate of interest on six-month, risk-free U.S. securities is 6%. In the spot market, $1 U.S. = 104.84 Japanese yen. In the six-month forward market, $1 U.S. = 104.84 Japanese yen. If interest rate parity holds, what is the current nominal interest rate on six-month, risk-free Japanese securities?

Breakeven point, Operating profit, Exchange rate

1. Howard Beal Co. manufactures molds for casting aluminum alloy test samples. Fixed costs amount to $20,000 per year. Variable costs for each unit manufactured are $16. Sales price per unit is $28. a. What is the contribution margin of the product? b. Calculate the breakeven point in unit sales and dollars c. What is the o

Implication of interest rate parity (IRP) and purchasing power parity (PPP)

1. Implication of IRP. Assume that interest rate parity exists. You expect that the one-year nominal interest rate in the U.S. is 7%, while the one-year nominal interest rate in Australia is 11%. The spot rate of the Australian dollar is $.60. You will need 10 million Australian dollars in one year. Today, you purchase a one-yea

Small Business Exchange Rate Exposure Assessment for The Sports Exports Company

Exchange Rate Exposure Assessment by the sports exports company. At the current time, The Sports Exports Company is willing to receive payments in British pounds for the monthly exports it sends to the United Kingdom. While all of its receivables are denominated in pounds, it has no payable in pounds or in any other foreign c

Global financing and exchange rate topics

Can you help me with some direction on the following topic? Global financing and exchange rate topic on financing via letters of credit and exim bank and commercial banks? Need assistance in defining the topic and how the topic is used in global financing operations and describe the importance of managing risks surrounding th

In March 2004, an American investor buys 1,000 shares in a M

In March 2004, an American investor buys 1,000 shares in a Mexican company at a price of 500 pesos each. The share does not pay any dividend. A year later she sells the shares for 550 pesos each. The exchange rates when she buys the stock are shown in Table 28.1. Suppose that the exchange rate at the time of sale is peso $12.

Foreign Purchases, Sales Transactions and Hedging

Part I Maple Company had the following export and import transactions during 20X5: 1. On March 1, Maple sold goods to a Canadian company for 30,000 Canadian dollars (C$), receivable on May 30. The spot rates for marks were C$1 _ $.65 on March 1 and C$1 _ $.68 on May 30. 2. On July 1, Maple signed a contract to purchase equipm

Foreign Exchange Markets Summary

Consider the following: You have been asked by a local college to write a lecture that explains the gold standard and addresses the functions of the world's major exchange markets. Write a 1050 word summary detailing the functions of the worlds major foreign currency exchange markets. Be sure to discuss the positive and nega

Global Finance - An optimal financing/investment strategy

I need help getting started on this project. The scenario is: A service organization considering expansion to Thailand. 1) Identify the foreign exchange rate data. 2) Use foreign exchange and cost of capital data to determine appropriate capital sources. Please explain why and how you came to these conclusions. Also mak