Share
Explore BrainMass

International Finance

International Finance Consequences

5. Bakrie, an Indonesian conglomerate, is assessing the likely consequences of the rupiah's precipitous decline on its different businesses. These businesses include a telecommunications company that is building a network (using mostly imported equipment) throughout Jakarta to offer wireless service to its residents, a company t

International Finance: Suppliers and Prices

Suppliers of the equipment used to make semiconductors, such as Applied Materials and LAM Research, who produce in the United States but are heavily dependent on sales to Asia, saw their share prices plummet in the wake of the Asian financial crisis. Explain.

What currency risks does Huaneng face

Please help with the following problems. Please provide brief explanations. Huaneng Power International is a large Chinese company that runs coal-fired power plants in five provinces and in Shanghai. It has close to $1.2 billion in U.S. dollar debt whose proceeds it has used to purchase equipment abroad. a. What currency

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

Reported Earnings and European Subsidiaries

Translation Exposure. Consider a period in which the U.S. dollar weakens against the euro. How will this affect the reported earnings of a U.S.-based MNC with European subsidiaries? Consider a period in which the U.S. dollar strengthens against most foreign currencies. How will this affect the reported earnings of a U.S.

Income Level and Currency Value

A large increase in the income level in Mexico along with no growth in the U.S. income level is normally expected to cause (assuming everything else remaining constant) a(n) ______ in Mexican demand for U.S. goods, and the Mexican peso should _______. A) increase; appreciate B) increase; depreciate C) decrease; depreciat

Net Inflows and Outflows of Foreign Currency

Subsidiary A of Mega Corporation has net inflows in Australian dollars of A$1,000,000, while Subsidiary B has net outflows in Australian dollars of A$1,500,000. The expected exchange rate of the Australian dollar is $.55. What is the net inflow or outflow as measured in U.S. dollars?

Assessment of declining dollar on US based company

Assess the likely consequences of a declining dollar on Fluor Corporation, the international construction-engineering contractor based in Irvine, California. Most of Fluor's value-added involves project design and management; most of its costs are for U.S. labor in design, engineering, and construction-management services. T

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

International Fisher Effect (IFE)

Shouldn't the IFE discourage investors from attempting to capitalize on higher foreign interest rates? Why do some investors continue to invest overseas, even when they have no other transactions overseas?

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

Testing IRP: The one-year interest rate in Singapore is 11 percent. The one-year interest rate in the U.S. is 6 percent. The spot rate of the Singapore dollar (S$) is $.50 and the forward rate of the S$ is $.46. Assume zero transactions costs. a. Does interest rate parity exist? b. Can a U.S. firm benefit from inves

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

Export sale denominated in a foreign currency

1) A company makes an export sale denominated in a foreign currency and allows the customer one month to pay. Under the two-transaction perspective, accrual approach, how does the company account for fluctuations in the exchange rate for the foreign currency? 2) What concept underlies the two-transaction perspective in accoun