The expected rate of return and its standard deviation,
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1. An American business needs to pay (a) 15,000 Canadian dollars, (b) 1.5 million yen,and (c) 55,000 Swiss francs to businesses abroad. What are the dollar payments to the respective countries?
2. An American business pays $20,000, $5,000, and $15,000 to suppliers in, respectively, Japan, Switzerland, and Canada. How much, in local currencies, do the suppliers receive?
3. Compute the indirect quote for the spot and forward Canadian dollar, Japanese Yen, and Swiss franc contracts.
4. You are considering a security with the following possible rates of return:
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Solution Summary
This post shows how to calculate the expected rate of return and its standard deviation, indirect quote for the spot and what are the dollar payment
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Please see the attached file. Thanks
COUNTRY CONTRACT $/FOREIGN CURRENCY
Canada-dollar Spot .8437
30-day .8417
90-day .8395
Japan-yen Spot .004684
30-day .004717
90-day .004781
Switzerland-franc Spot .5139
30-day .5169
90-day .5315
1. An American business needs to pay (a) 15,000 Canadian dollars, (b) 1.5 million yen,and (c) 55,000 Swiss francs to businesses abroad. What are the dollar payments to the respective countries?
(a) 15,000 Canadian dollars
=15000*0.8437=US$ 12,655.50
(b) 1.5 million yen
=1.5*1000000*0.004684=US$ 7,026.00
(c) 55,000 Swiss francs
= 55000*0.5139=US$ 28,264.50
2. An American business pays $20,000, $5,000, and $15,000 to suppliers in, respectively, Japan, ...
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