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    Foreign Exchange Rates

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    Global Business Question

    Here are the basic types of foreign exchange transactions. Which one of these do you think you need to pay the most attention to (which poses the greatest risk)? a) Spot b) Forward c) Swap

    Forecasted exchange rate for euros to U.S. dollar

    Given where things are going with the project, you decide to start giving some thought to how the company can make money or lose money by simply engaging in international transactions. You start by looking at the net sales figures from the European region that the sales vice president provided in the following: Year 1 sales

    Purchasing-power-parity theory

    1. "A rise in the dollar price of yen necessarily means a fall in the yen price of dollars." Do you agree? Illustrate and elaborate: "The critical thing about exchange rates is that they provide a direct link between the prices of goods and services produced in all trading nations of the world." Explain the purchasing-power-

    Interest Rate Effects in the United States

    If interest rates are higher in Italy than in the United States, the market expects that the lira will: A) appreciate against the dollar. B) depreciate against the dollar. C) offer a higher real rate of return than the dollar. D) be selling at a forward discount.

    Parity conditions question

    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 next year is expected to rise to

    Currency Conversion: The Irish Lottery

    Congratulations, you just won the Irish Lottery! You bought a ticket while you were on vacation in Ireland, and you just won a 1 million Euro jackpot after all taxes were taken out. If the current exchange rate is US$1 equals 1.25 Euros, how much did you win in US dollars? Suppose that the interest rate in Irish banks is 5%

    The Foreign Exchange Market

    You manufacture wine goblets. In mid June you receive an order for 10,000 goblets from Japan. Payment of ¥400,000 is due in mid December. You expect the yen to rise from its present rate of $1=¥130 to $1=¥100 by December. You can borrow yen at 6% per annum. What should you do?

    Select a U.S. multinational company. In terms of currency denomination, discuss how the firm prices its revenues and costs. For MNE's with multiple foreign operations, consider any one of those operations and the contribution it is making to the parent firm's profits. Using this information, what do you think would be the effect of increases/decreases in the dollar's exchange value on the firm's profitability? Be sure to show all applicable work.

    Select a U.S. multinational company. In terms of currency denomination, discuss how the firm prices its revenues and costs. For MNE's with multiple foreign operations, consider any one of those operations and the contribution it is making to the parent firm's profits. Using this information, what do you think would be the effect

    Exchange Rate/Budget

    I'm sure that I'm over-simplifying this, but it seems that a company could simply use the average historical exchange rate between the two currencies for the purposes of budgeting....couldn't they?

    Total Capital Structure, Debt, and Equity

    Your next meeting is with the head of treasury to discuss the international impact to the firm's capital structure. Toto Matsui, the head of treasury, wants you to analyze what would be the implications to the firm's capital structure if the company took on debt denominated in some currency other than U.S. dollars. In particular

    Foreign Market

    Do you think that understanding the foreign exchange market has any benefits when it comes to finding ways to elude entry or exit barriers??

    What is the percentage appreciation/depreciation of the SF using indirect ask quotes for the SF? What is the percentage premium/discount on the SF using indirect bid quotes for the dollar? Using a 30-day forward rate? What is the exchange rate for this transaction using indirect quotes for the SF? What is the bid ask percentage spread? What are the outright 90-day forward rates? What is the forward discount or premium associated with the Swiss franc? Compute the percentage bid-ask spreads on spot and forward Swiss francs.

    1. The foreign exchange quotations shown below are for the Swiss franc (SF) and the U.S. dollar ($). U.S. Dollar Equivalent Currency per U.S. Dollar Wednesday Tuesday Wednesday Tuesday Bid Ask Bid Ask Bid Ask Bid Ask Spot 0.6506 0.6508 0.6536 0.6539 1.5365 1.5370 1.5293 1.5300 30 day 0.6496 0.6500 0.6523 0.65

    Hedging Continual Economic Exposure

    Consider a real-world dilemma face by many firms that rely on exporting. Clark Financing, Inc. produces its products in its factory in Texas and exports most of the products to Mexico each month. The exports are denominated in pesos. Clark Financing Inc. recognizes that hedging on a monthly basis does not really protect against

    Determining Exchange Rates

    Cross rates; Suppose the exchange rate between the U.S. dollar and the Swedish krona was 10 krona=1.00, and the exchange rate between the dollar and the Bristish pound was =1.50. What was the exchange rate between Swedish kronas and pounds.

    Fair Value Hedge of Jensen Company

    Use the following information for the problems listed below: On September 1, 2004, Jensen Company received an order to sell a machine to a customer in Canada at a price of 100,000 Canadian dollars. The machine was shipped and payment was received on March 1, 2005. On September 1, 2004, Jensen Company purchased a put option g

    The Foreign Exchange Market and It's Function

    Define the foreign exchange market, and explain its function. What is foreign exchange risk, and how can this impact global business? What are the benefits of the global capital market?

    Problem on Exchange Rate Risk Management

    Exchange Rate Risk Management. See attached for full problem description. Vogl Co. is a U.S. firm conducting a financial plan for the next year. It has no foreign subsidaries but more than half of its sales are from exports. Its foreign cash inflows to be received from exporting and cash outflows to be paid for imported supp

    Managing exchange rate risk

    If a firm in the United States is due to receive payment of 1 million Australian dollars in 8 years time. It would like to protect itself against a decline in the value of the Australian dollar but finds its difficult to arrange a forward sale of such a long period. Is there any other way that it can protect itself?

    Exchange rate.

    A U.S. company orders merchandise from a Japanese company at a cost of 100 million yen. The merchandise must be paid for in yen. Exchange rates are shown below. U.S. Dollar/Yen Yen/U.S... Dollar Spot 105 0.00952381 30-day forward 110 0.009090909 90-day forward 111 0.009009009 180-day forward 115 0.0

    Foreign Exchange

    22. Pigskin Co., a U.S. corporation, sold inventory on credit to a British company on April 8, 2004. Pigskin received payment of 35,000 British pounds on May 8, 2004. The exchange rate was $1 = £0.65 on April 8 and $1 = £0.70 on May 8. What amount of foreign exchange gain or loss should be recognized? (round to the nearest

    Foreign Exchange Markets: Paperwork for Exports

    1) A leader in your firm has been studying the foreign exchange market for a number of years and believes that she can predict several of the foreign currency exchange rates relative to the U.S. dollar. The firm has $300,000 to invest in the spot, forward, or options markets. The spot rate is $1.2622 to the euro, and in 12 month