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    International Finance

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    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

    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 and Current Price

    Assume that on November 1, the spot rate of the British pound was $1.58 and the price on a December futures contract was $1.59. Assume that the pound depreciated during November so thatby November 30 it was worth $1.51. a) What do you think happened to the futures price over the month of November? Why? b) If you had known

    Currency Derivatives

    Assume that the euro's spot rate has moved in cycles over time. How might you try to use futures contracts on euros to capitalize on this tendency? How could you determine whether such a strategy would have been profitable in previous periods?

    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?

    Currency Derivatives and List of Factors

    List the factors that affect currency call option premiums and briefly explain the relationship that exists for each. Do you think an at-the-money call option in euros has a higher or lower premium than an at-the-money call option in British pounds (assuming the expiration date and the total dollarvalue represented by each optio

    Hedging with Currency Derivatives

    The Superbowl Champs, New York Giants plans to play in the United Kingdom next year. All expenses will be paid by the British government and the Giants will receive a check for $1million pounds. The team anticipates that the pound will depreciate substantially by the scheduled game date. The NFL's approval will not occur for th

    Speculating with Currency Call Options

    The May Company purchased Canadian dollar call options for speculative purposes. If these options are exercised, the May Company will immediately sell the Canadian dollars in the spot market. Each option was purchased for a premium of $.03 per unit, with an exercise price of $.75. The May Company plans to wait until the expirati

    Adverse Selection and Currency Mediums

    60/10. Give an example of how the problem of adverse selection might prevent you from getting financing for something you want to do. Can you think of a way of overcoming the problem? 60/12. Why is it that a country's postage stamps are not as good a medium of exchange as its paper currency? Note: Please correspond th

    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?

    International Finance - Fresh Juices, Inc.

    Details: Hector, Bonita, and the entire management team have been pleased with your work on the project. Given the work you have done, the senior officers feel more informed and closer to making a decision on the international expansion. Given that the company is looking at Canada as a possible expansion market, you have bee

    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

    Traditional and Derivative Financial Instruments

    What is meant by the term underlying as it relates to derivative financial instruments? What are the main distinctions between a traditional financial instrument and a derivative financial instrument?

    Currency arbitrage

    You are an investor looking for arbitrage opportunities in foreign currency markets. You encounter the following situation between two currency exchange houses in New Zealand: BANK #1 BANK #2 Bid Ask Bid Ask NZ$ $0.635 $0.64 $0.645 $0.65 You are in

    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

    Fisher Effect- U.S and the Euro inflation and currency rates

    Assume that the U.S and the Euro nominal interest rate are equal. Subsequently, the U.S. nominal rate decreases while the Euro nominal interest rate remains stable. According to the Fisher Effect: 1. Explain what this implies about the inflation rates between the currencies. 2. Explain also what should happen between

    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 Trade and German Reparations

    The reparations payments by Germany required under the Treaty of Versailles posed a problem: How were tax payments by German citizens to their government in German marks to be converted to dollar payments to United States lenders? Explain how these transfers might have been successfully carried out. Why was Germany unable to mak

    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

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