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    Foreign Exchange Rates

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    Swap Market and Currency Problem

    1. At present, LIBOR3 is 7.93% and LIBOR6 is 8.11%. What is the forward rate for a LIBOR3 deposit to be placed in three months? 2. Company A, a low-rated firm, desires a fixed-rate, long-term loan. A currently has access to floating interest rate funds at a margin of 1.5% over LIBOR. Its direct borrowing cost is 13% in t

    Using PPP/IFE to Determine Exchange Rates

    An international pension fund manager uses the concepts of purchasing power parity (PPP) and the international fisher effect (IFE) to forecast spot exchange rates. The pension manager gathers the financial information as follows. Base Price Level 100 Current U.S. Price Level 105 Current South African Price Level 111 Base Ran

    Foreign Exchange Calculations

    1. Rolls-Royce, the British jet engine manufacturer, sells engines to U.S. airlines and buys parts from U.S. companies. Suppose it has accounts receivable of $1.5 billion and accounts payable of $740 million. It also borrowed $600 million. The current spot rate is $1.512/pound. a. What is Rolls-Royce's dollar transaction

    Exchange Rates: Example

    1. Suppose the price of gold is 155 marks. a) If the dollar price of gold is $100 per ounce, what should you expect the dollar price of a mark to be? b) If it actually only costs $0.60 to purchase one mark, how could one make arbitrage profits? 2. Fill in the missing exchange rates in the following table: US dollar

    IFE Application to Asian Crisis

    Please help with the following problem. Before the Asian crisis, many investors attempted to capitalize on the high interest rates prevailing in the Southeast Asian countries although the level of interest rates primarily reflected expectations of inflation. Explain why investors behaved in this manner. Why does the IFE s

    Inflation and Interest Rate Effects

    The opening of Russia's market has resulted in a highly volatile Russian currency (the ruble). Russia's inflation has commonly exceeded 20 percent per month. Russian interest rates commonly exceed 150 percent, but this is sometimes less than the annual inflation rate in Russia. a. Explain why the high Russian inflation has pu

    Spot rate

    1. Assume that the spot exchange rate of the British pound is $1.73. How will this spot rate adjust according to PPP if the United Kingdom experiences an inflation rate of 7 percent while the United States experiences an inflation rate of 2 percent? 2. Assume that the spot exchange rate of the Singapore dollar is

    Covered Interest Arbitrage in Both Directions

    Covered Interest for New Zealand (NZs) and US dollars. The one-year interest rate in New Zealand is 6%. The one-year interest rate in US is 10% The spot rate of the New Zealand dollar (NZs) is $.50 The forward rate of the New Zealand dollar is $.54 Is covered interest arbitrage feasible for U

    Foreign Exchange Derivatives

    Managers in multinational corporations use derivatives to hedge their exposure to currency risk. Therefore, they must understand different forms of currency derivatives and how the derivatives markets work. How foreign exchange derivatives markets work. Explain the role of derivatives in hedging the foreign currency risk.

    Exchange Rates and the Time Value of Money

    39. The exchange rate between the pound sterling and the dollar is currently $1.50 per pound, the dollar interest rate is 7% per year, and the pound interest rate is 9% per year. You have $100,000 in a one-year account that allows you to choose between either currency, and it pays the corresponding interest rate. a. If you ex

    Speculating on Anticipated Exchange Rates

    Citi Bank expects that the Singapore dollar will depreciate against the dollar from its spot rate of $.43 to $.42 in 60 days. The following interbank lending and borrowing rates exist: Currency Lending Rate Borrowing Rate US Dollar 7.0% 7.2% Singapore 22.0%

    Determining and Forecasting the Exchange Rates.

    Please see attachment. 1. Two countries, the United States and England, produce only one good, wheat. Suppose the price of wheat is $3.25 in the United States and is 1.35 pounds in England. a. According to the law of one price, what should the $: Pound spot exchange rate be? b. Suppose the price of wheat over the n

    Because fluctuating currency rates are an important aspect of international dealings, knowing how foreign exchange markets function will help ensure your success in the international business market.

    Please help me with the following: Because fluctuating currency rates are an important aspect of international dealings, knowing how foreign exchange markets function will help ensure your success in the international business market. Consider this scenario You have been asked by a local college to write a lecture that exp

    International Finance - Fresh Juices, Inc

    Scenario: As a senior financial analyst for Fresh Juices, Inc., the largest fresh fruit drink company in the United States, you are a key player in corporate finance for the business. You are consulted on major capital projects, prepare analysis for executive officers, present material at senior management meetings, and pla

    Swenser Corporation - What is the effective interest rate on the foreign loan?

    Swenser Corporation arranged a two-year, $1,000,000 loan to fund a foreign project. The loan is denominated in Mexican Pesos, carries a 10% nominal rate, and requires equal semi-annual payments. The exchange rate at the time of the loan was 5.75 pesos per dollar but immediately dropped to 5.10 pesos per dollar before the first

    Foreign Currency Transaction

    On November 15, 2003, Chow Inc., a U.S. company, ordered merchandise FOB shipping point from a German company for 200,000 euros. The merchandise was shipped and invoiced on December 10, 2003. Chow paid the invoice on January 10, 2004. The spot rates for euros on the respective dates were: November 15, 2003 $.4955 December 10

    Exchange Rates Explanation

    Chapter 23 (Quiz 1) 1. Exchange rates. Use table below for the problems a. How many euros can you buy for $100? How many dollars can you buy for 100 euros? b. How many Swiss francs can you buy for $100? How many dollars can you buy for 100 Swiss francs? c. If the euro depreciates with respect to the dollar, will the

    Triangular Arbitrage Problem

    Assume the following information Value of Canadian dollar in U.S. dollars $.90 Value of New Zealand dollar in U.S. dollars $.30 Value of Canadian dollar in New Zealand dollars NZ$3.02 Given this information , is triangular arbitrage possible? If so, explain the steps that would relect triangular arbitrage, and compute t

    Financial Statement Reporting and Disclosures

    See the attached file. Indicate how each of the following items would be recognized in a company's financial statements for 2007, and what elements would be recognized. If no elements are to be recognized, note this in the answer. For each item, conceptually justify why the elements are to be recognized or why none should be