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    Foreign Exchange Rates

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    Affect of Transactions on Present and Future Exchange Rates

    Describe how these three typical transactions should affect present and future exchange rates. a. Seagram imports a year's supply of French champagne. Payment in French francs is due immediately. b. American Motors sells a new stock issue to Renault, the French car manufacturer. Payment in dollars is due immediately. c.

    Determination Of Exchange Rates

    Suppose prices start rising in the United States relative to prices in Japan. What would we expect to see happen to the dollar:yen exchange rate? Explain. If a foreigner purchases a U.S. government security, what happens to the supply of, and demand for, dollars?

    International Finance: Multiple Choice Questions. J curve, real interest rate, options, spot rate, international Fisher effect, translation exposure, diversification, cash flow from operations, firm's cost of capital, international trade, interest rate parity, expected effective financing rate, inter-subsidiary leading or lagging strategies, covered interest arbitrage, CAPM

    1. The "J curve" effect describes ? the continuous long-term inverse relationship between a country's current account balance and the country's growth in gross national product ? the short-run tendency for a country's balance of trade to deteriorate even while its currency is depreciating ? the tendency for exporters to initi

    Hedge

    Need help getting started on a paper for the following - When you sell a product made in the Euro area in the U.S. The price increases have sharply cut you sales. You are worried that the Euro will increase again causing a further loss. You can buy a currency hedge for 2009 that would allow you to convert dollars into Eur

    A television set costs $500 in the United States.

    Problem 26-3 (Purchasing Power Parity): A television set costs $500 in the United States. The same set costs 550 euros in France. If purchasing power parity holds, what is the spot exchange rate between the euro and the dollar?

    Boisjoly Watch Imports Exchange Rate Changes

    Boisjoly Watch Imports has agreed to purchase 15,000 Swiss watches for 1 million francs at today's spot rate. The firm's financial manager, James Destreumaux, has noted the following current spot and forward rates: U.S.Dollar/Franc Franc/U.S. Dollar Spot 1.6590 0.6028 3

    Concept of adequate disclosure issues facing accountants

    The concept of adequate disclosure continues to be one of the most important issues facing accountants. Disclosure may take various forms. If you should analyze the following: The various forms of disclosure available in published financial statements .The disclosure issues addressed by the: .AICPA's Code of Professional

    Middle American Corporation (MAC) produces a line of corn silk cosmetics.

    18. Middle American Corporation (MAC) produces a line of corn silk cosmetics. All of the inputs are purchased domestically and processed at the factory in Des Moines, Iowa. Sales are only in the United States, primarily west of the Mississippi. a. Is there any sense in which MAC is exposed to the risk of foreign exchange rate

    Nissan produces a car that sells in Japan for ¥1.8 million.

    6. Nissan produces a car that sells in Japan for ¥1.8 million. On September 1, the beginning of the model year, the exchange rate is ¥150:$1. Consequently, Nissan sets the U.S. sticker price at $12,000. By October 1, the exchange rate has dropped to ¥125:$1. Nissan is upset because it now receives only $12,000 x 125 = ¥1.5 m

    Hilton International is considering investing in a new Swiss hotel.

    1. Hilton International is considering investing in a new Swiss hotel. The required initial investment is $1.5 million (or SFr 2.38 million at the current exchange rate of $0.63 = SFr 1). Profits for the first ten years will be reinvested, at which time Hilton will sell out to its partner. Based on projected earnings, Hilton's s

    International Finance: Changing Exchange Rates

    On January 1, the U.S. dollar:Japanese yen exchange rate is $1 = ¥250. During the year, U.S. inflation is 4% and Japanese inflation is 2%. On December 31, the exchange rate is $1 = ¥235. What are the likely competitive effects of this exchange rate change on Caterpillar Tractor, the American earth moving manufacturer, whose to

    Suppose today's exchange rate is $0.62/Euro.

    15. Suppose today's exchange rate is $0.62/Euro. The 6-month interest rates on dollars and Euro are 6% and 3%, respectively. The 6-month forward rate is $0.6185. A foreign exchange advisory service has predicted that the Euro will appreciate to $0.64 within six months. a. How would you use forward contracts to profit in the a

    Tokyo Disneyland

    1. In May 1988, Walt Disney Productions sold to Japanese investors a 20‑year stream of projected yen royalties from Tokyo Disneyland. The present value of that stream of royalties, discounted at 6% (the return required by the Japanese investors), was Â¥93 billion. Disney took the yen proceeds from the sale, converted them

    Foreign Exchange Markets Summary

    Consider the following scenario: 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 foreign exchange markets. Write a 1050-to 1400-word summary detailing the functions of the world's major foreign currency exchange markets. Be sure to discuss

    Parity Relationships and Arbitrage

    9. You are an expatriate working for Bank America in Hong Kong, and observe the following prices. Formulate an arbitrage strategy to profit from the situation. ? Swiss Franc per Dollar exchange rate is 1.30 spot and 1.35 for 180-day forward. ? Swiss interest rate is 6.00% compounded daily. ? U.S. stock market index is 1500

    Parity Relationships and Arbitrage

    8. You are an expatriate working for CommerzBank in Frankfurt West Germany, and observe the following prices. Formulate an arbitrage strategy to profit from the situation. ? Dollar per Euro exchange rate is 1.25 spot and 1.26 for 180-day forward. ? German interest rate is 6.00% compounded daily. ? U.S. stock market index

    Parity Relationships and Arbitrage

    7. The following prices are observed. Formulate an arbitrage strategy to profit from the situation. ? London gold price per ounce is 150 spot and 154.50 for 180-day forward. ? London Dollar exchange rate is .50 spot and .48 for 180-day forward. ? U.S. interest rate is 5.00% compounded daily.

    Parity Relationships and Arbitrage

    3. The following prices are observed. Formulate an arbitrage strategy to profit from the situation. ? Dollar per Euro exchange rate is 1.25 spot and 1.20 for 180-day forward (one Euro buys 1.25 spot and $1.20 forward). ? German interest rate is 7.9% compounded daily. ? U.S. interest rate is 5.0% compounded daily.

    Formulate an Arbitrage Strategy Based on the Exchange Rates

    2. The following prices are observed. - Swiss Franc per Dollar exchange rate is 1.30 spot. - Pound per Dollar exchange rate is .40 spot. - Swiss Franc per Pound exchange rate is 2.60 spot. What strategy could an arbitrageur use to profit from this scenario?

    Assessing Economic Exposure

    Alaska, Inc., plans to create and finance a subsidiary in Mexico that produces computer components at a low cost and export them to other countries. It has no other international business. The subsidiary will produce computers and export them to Caribbean islands and will invoice the products in US dollars. The value of the curr

    International Finance

    10. Forecasting with a Forward Rate. Assume that the four-year annualized interest rate in the United States is 9 percent and the fouryear annualized interest rate in Singapore is 6 percent. Assume interest rate parity holds for a four-year horizon. Assume that the spot rate of the Singapore dollar is $.60. If the forward rate

    International Finance: Foreign Exchange Rates

    17. Forecasting Based on PPP versus the Forward Rate. You believe that the Singapore dollar's exchange rate movements are mostly attributed to purchasing power parity. Today, the nominal annual interest rate in Singapore is 18%. The nominal annual interest rate in the U.S. is 3%. You expect that annual inflation will be about 4%