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International Finance

Dow Accomplishing New Pricing Policy

5. In September 1992, Dow Chemical reacted to the currency chaos in Europe by switching to Euro pricing for all its products in Europe. The purpose, said a Dow executive, was to shift currency risk from Dow to its European customers. Moreover, said the Dow executive, the policy was fairer: By setting the same DM price throughout

International Finance Investigating Medium Term Financing

3. Gizmo, U.S.A. is investigating medium term financing of $10 million in order to build an addition to its factory in Toledo, Ohio. Gizmo's bank has suggested the following alternatives: Type of loan Rate 3-year U.S. dollar loan 14 3-year Euro loan 8 3-year Swiss

Square Corp. has not tapped the Swiss-franc public debt market because of concern about a likely appreciation of that currency and only wishes to be a floating-rate dollar borrower

2. Square Corp. has not tapped the Swiss-franc public debt market because of concern about a likely appreciation of that currency and only wishes to be a floating-rate dollar borrower, which it can be at LIBOR + 3/8%. Circle Corp. has a strong preference for fixed-rate Swiss-franc debt, but it must pay 1/2 of 1% more than the 5

Convergence of the International Financial Reporting Standards

The Financial Accounting Standards Board has undertaken several key initiatives to pursue the goal of convergence of International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (GAAP). Furthermore, the Board conducts several joint projects with the IASB, and works with the IASB on the sho

Reporting Standards and Accounting Principles

The Financial Accounting Standards Board has undertaken several key initiatives to pursue the goal of convergence of International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (GAAP). Furthermore, the Board conducts several joint projects with the IASB, and works with the IASB on the sho

IRP, PPP, and Speculating in Currency Derivatives.

34. The U.S. three-month interest rate (unannualized) is 1%. The Canadian three-month interest rate (unannualized) is 4%. Interest rate parity exists. The expected inflation over this period is 5% in the U.S. and 2% in Canada. A call option with a three-month expiration date on Canadian dollars is available for a premium of $.0

Purchasing Power Parity (PPP)

1. Explain the theory of purchasing power parity (PPP). Based on this theory, what is a general forecast of the values of currencies in countries with high inflation? 2. Explain the rationale of the PPP theory. 3. Explain how you could determine whether PPP exists. Describe a limitation in testing whether PPP

International Financial Management

Integrating IRP and IFE. Assume the following information is available for the U.S. and Europe: U.S. Europe Nominal interest rate 4% 6% Expected inflation 2% 5% Spot rate

International Financial Management

1. Deriving the Forward Rate: Assume that annual interest rates in the U.S. are 4 percent, while interest rates in France are 6 percent. a. According to IRP, what should the forward rate premium or discount of the euro be? b. If the euro's spot rate is $1.10, what should the one-year forward rate of the euro be?

Multiple choice questions on derivatives

Please see attachment. 1. Which of the following contract terms is not set by the futures exchange? a. the price b. the deliverable commodities c. the dates on which delivery can occur d. the size of the contract e. the expiration months 2. Find the forward rate of foreign currency Y if the spot rate is $4

Currency Derivatives

Currency futures markets are commonly used as a means of capitalizing on shifts in currency values, because the value of a futures contract tends to move in line with the change in the corresponding currency value. Recently, many currencies appreciated against the dollar. Most speculators anticipated that these currencies would

Currency Derivatives

What are the advantages and disadvantages to a U.S. corporation that uses currency options on euros rather than a forward contract on euros to hedge its exposure in euros?

Global Monetary and Financial System

How do you define the global monetary and financial system? What are the international and regional institutions that comprise the system? What role do these institutions play in promoting global business operations?

Currency Swap & Spot Exchange Rate

ABC Corp. entered into a currency swap with its bank, providing that ABC borrows $5 million at 10% and swaps for a 12% yen loan. The spot exchange rate is ¥105/$. If interest only is to be repaid on an annual basis, how much does ABC pay annually to the bank?

Management of Personal Finances

You have been asked by an elderly relative to take over the management of her finances. She is in reasonably good health, and currently lives in a "life-care" facility that offers a wide range of living arrangements, from independent, assisted living and custodial care. She has total funds of $1.1 million that provide the primar

Accounting Reporting Criteria - Compare and Contrast

Please help me with the following: Prepare a 700 word paper, in which you compare and contrast the accounting reporting criteria (regulatory environment, issues with foreign currency, differences in GAAP, etc.) of a U.S. company with a foreign company. Select U.S. Company and foreign company (Go with Ford and Nissan) for c

Function of the Foreign Exchange Market

A) What is the function of the foreign exchange market? B) Who are the market participants? C) What is the difference between the spot and forward markets?

International Finance - Etemadi and Co.

Etemadi and Co., a U.S. firm with subsidiaries in Chile and Brazil, can justify a transfer price anywhere between $600 and $800 per unit for cookware sets shipped from Chile to Brazil while simultaneously preserving positive profits in both locations. The corporate income tax rate in Chile is 30 percent and the corporate income

Corporate Governance

What does corporate governance mean? What is the role of the Board of Directors in a corporation? Based on research, give a real-world example of issues facing a board of directors. Supplemented with extra information on corporate governance and the role of the board of directors.

Forecasting and sensitivity analysis

1. What are the ramifications if one or more of your projections/forecasts do not hold true? What will you do if, during implementation, you find that you overstated or understated your projections? 2. How does sensitivity analysis relate to contingency planning? What are a couple risk mitigation strategies that you could