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Foreign Exchange Rates

Question on futures hedging

The following is a question I answered that came up short, I think probable I should have looked at it from a short position: 1. Explain how futures contracts could be used to hedge a bond portfolio against the risk of rising interest rates. Then explain how futures could be used by both exporters (due to receive foreign curr

Covered interest arbitrage problems

2. Exchange rate pass through. Assume that the export price of a Nissan Maxima from Osaka Japan is ¥3,000,000. The exchange rate is ¥122/$. The forecast rate of inflation in the United States is 2% per year and tis 0% per year in Japan. a. What is the export price of the Nissan at the beginning of the year expressed in US d

Finance - Widget Company of America

You are the financial manager of Widget Company of America. The purchasing manager of your company asks for your advice on an upcoming purchase of Dilithium crystals for the next generation widget project. He can buy the crystals from suppliers in four different countries: Spain, South Africa, Egypt, and Ireland. The current

Foreign currency losses

Company X routinely purchases inventory from foreign markets. Transactions in foreign currency leaves Company X exposed to the risks associated with exchange rate changes. What are some methods Company X could use to reduce its exposure to foreign currency losses?


** (See attached file for full problem description) ** --- Mercan Corporation acquired 100% of Furrin Corp. on Jan.1, 2006. Furrin Corp. operates primarily in the country in which it is domiciled (Australia) and therefore its financial statements are to be translated using the CURRENT RATE Method. Mercan paid 540,000 Aus

Finance help

Last year, the French marketing subsidiary of International Pharmaceuticals Corporation, (IPC) a New Jersey based drug manufacturer, earned 700,000 euros. This year, partly due to a weaker U.S. dollar, the French subsidiary will earn 900,000 euros. Last year the exchange rate was 1.2 euros per dollar, and this year, it is 1.0 eu

Change in US Exchange rates based on political changes

7. The President of the U.S. announces that he will reduce inflation with a new anti-inflation program. If the public believes him, predict what will happen to U.S. exchange rates. 11. If American auto companies make a breakthrough in automobile technology and are able to produce acar that gets 60 miles to the gallon, what wi

Global Financing and Exchange Rate Mechanisms

Currency Hedging a. Describe Currency Hedging, b. How it is used in global financing operations, c. Describe its importance in managing risks. At least three sources must be cited (preferably peer reviewed sources). I am willing to negotiate the credit value for a high quality response to my query. I can also add t

Finance: Put & call options, currency contracts, spot rates, economic exposure

1.- Which of the following is NOT true for the writer of a put option? a.-The maximum loss is limited to the strike price of the underlying asset less the premium. b.-The gain or loss is equal to but of the opposite sign of the buyer of a put option. c.-The maximum gain is the amount of the premium. d.-All of the above

Financial Statements for Desert City Roasters: prepare and analyze

Please complete the last three years of the financial statements using the information contained in the mini case study in the adobe attachment. Also please provide answers to the following questions. 1) In reading the case have the companys financial goals been achieved and explain why or why not? 2) Please provide some r

Balance Sheet Conversion

The balance sheet below represents the end-of-year balance sheet for a new wholly owned subsidiary of a U.S. multinational corporation operating in Poland. All amounts are shown in millions of zloty, the local currency. The subsidiary was incorporated on January 1, 1994, when the exchange rate was 40.50/zloty. Since the subsidia

If a U.S. company starts a new subsidiary in Papua New Guinea on January 1

I need more assistance with this question. Previous help did not seem correct or I did not understand the solution. If a U.S. company starts a new subsidiary in Papua New Guinea on January 1 with an equity stake of 700 million kina (the currency of Papua New Guinea), and earns 300 million kina of income during the year which

Gain or loss in forward contract

I need help solving this problem: --- 1) You are the Vice President of Finance for Richmond Resources, headquartered in Phoenix, Arizona. In January 2002, your firm's Canadian subsidiary obtained a 6-month loan of $100,000 Canadian dollars from a bank in Tucson to finance the acquisition of a titanium mine in Quebec province

Global Financing and Exchange Rate Mechanisms

I need your help answeing this questions: The topic is Roles of International financial Institutions (e.g. IMF, World Bank, ADB, etc.) 1. How do i describe this topic and analyze this topic? 2. How is this topic used in global financing operations and its importance in managing risks. 3. How would I discuss this topi

Business Risk Analysis; Global Financing and Exchange Rate

1.) How do I conduct a business risk analysis and what does business risk analysis mean? 2.) How do I analyze global financing and exchange rate mechanisms and what does global financing mean and wht does exchange rate mechanisms mean?

Multiple choice: influence on exchange rate

Question: If the U.S. and Japan engage in much capital flows but little trade, _______ directly influences their exchange rate the most. If the U.S. and Switzerland engage in much trade but little capital flows, _______ directly influences their exchange rate the most. a) interest rate differentials; interest rate d

Exchange Rate as a Policy Tool; Whitewater Earnings Before Interest and Taxes

It has been argued that the exchange rate can be used as a policy tool. Assume that the U.S. government would like to reduce unemployment. Which of the following is an appropriate action given this scenario? weaken the dollar. strengthen the dollar. buy dollars with foreign currency in the foreign exchange marke

Exchange rate

1) Under a fixed exchange rate system, U.S. inflation would have a greater impact on inflation in other countries than it would under a freely floating exchange rate system. true. false. 2) Rockford Co. is a U.S. manufacturing firm that produces goods in the U.S. and sells all products to retail stores in the U.K.;

Depreciation of the euro; locational arbitrage etc.

Sample Multiple choice--please provide answer for study. Depreciation of the euro relative to the U.S. dollar will cause a U.S.-based multinational firm's reported earnings (from the consolidated income statement) to _______. If a firm desired to protect against this possibility, it could stabilize its reported earnings by __

Foreign Investments - depreciation charge

Please work problems; formula and showing how to solve problem is most important (so I can see how to solve similar problems). Thanks Suppose a firm has just made an investment in France that will generate $2 million annually in depreciation, converted at today's spot rate. Projected annual rates of inflation in France an

Solving Foreign Exchange Rate Problems

Suppose that IBM would like to borrow fixed-rate yen, whereas Korea Development Bank (KDB) would like to borrow floating-rate dollars. IBM can borrow fixed-rate yen at 4.5 percent or floating-rate dollars at LIBOR + 0.25 percent. KDB can borrow fixed-rate yen at 4.9 percent or floating-rate dollars at LIBOR + 0.8 percent. a.

International Exchange and Interest Rates

Two countries, Great Britain and the United States, produce just one good: beef. Suppose the price of beef in the U.S. is $2.80 per pound and in Britian it is £3.70 per pound. (PLEASE - Do not take this question unless you have provided detailed answers and reasoning for each part) A) According to PPP theory, what should th

Business analysis/accounting

1.Delphi Switch and Signal sold equipment to a Canadian transportation company at a price of 150,000 Canadian dollars with payment due in 60 days. On the date of sale the exchange rate was 1.50 Canadian dollars per U.S. dollar. Delphi decided to hedge the risk of currency fluctuations by purchasing 150,000 Canadian dollars