While AIFS’s revenues are denominated in American Dollars (USD)‚ most of their costs are in foreign currencies as Euros (EUR) and British Pounds (GBP). Consequently‚ foreign exchange hedging has a crucial importance for the company because it provides protection against different types of risk that derive from its activity. In order to reduce risk‚ the company is using two hedging derivatives: forward contracts and put options to sell dollars. The aim of the paper is to determine an appropriate
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exchange rate was $0.54‚ what should the exchange rate be in 1988? In fact‚ the exchange rate in 1988 was DM 1 = $0.56. What might account for the discrepancy? (Price levels were measured using the consumer price index.) Answer. If e1981 is the dollar value of the German mark in 1988‚ then according to purchasing power parity e1988/.54 = 106/102 or e1988 = $.5612. The discrepancy between the predicted rate of $.5612 and the actual rate of $.56 is insignificant and hence needs no explaining. Historically
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FIN 4604 SAMPLE PROBLEMS I PART A 1. Suppose that the Brazilian real depreciates by 40% against the U.S. dollar. By how much will the dollar appreciate against the real? a. 67% b. 40% c. 32% d. 28% e. 75% 2. If the dollar appreciates by 300% against the Turkish Lira‚ obtain the Lira’s depreciation against the dollar. a. -67% b. –40% c. –32% d. -28% e. –75% 3. The asset market view of exchange rate determination says that the spot rate: a. Should follow a random walk. b. Is affected
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convincing argument for the weakness of the dollar? Why or why not? How do you interpret the evidence? The Irish controller certainly presented a very convincing argument. He argues that since the American trade deficit has been growing‚ the dollar will be likely to depreciate. From 1980 to 1984 the dollar appreciated against the punt by about 50% and interest rate averaged 12.6% during the same period. These high interest rates have caused the dollar to appreciate against other currencies and
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AUD - Australian Dollar AUD Stats Name: Australian Dollar Symbol: $ Cent: c Minor Unit: 1/100 = Cent Central Bank Rate: 2.5 Top AUD Conversion: AUD/GBP AUD Profile Inflation: 2.4% Nicknames: Buck‚ Dough Coins: Freq Used: $1‚ $2‚ 5c‚ 10c‚ 20c‚ 50c Banknotes: Freq Used: $5‚ $10‚ $20‚ $50‚ $100 Central Bank: Reserve Bank of Australia Website: http://www.rba.gov.au AUD Profile Inflation: 2.4% Australian Dollar History Importance of the Australian Dollar The central bank in Australia is called
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cups at a cost of x cents for a package of ten and lids at a cost of y cents per dozen‚ which of the following represents its material cost‚ in cents‚ of c cups of coffee? 2. If a car rental company charges $100 for each rental‚ a dollars per mile‚ and b dollars per hour‚ which of the following represents the total cost to rent a car for 6 hours and travel 250 miles? 100 + 250a + 6b 3. In a library there are currently B bookshelves‚ each with 40 books. C new bookshelves are added‚ then 5 books
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bid-ask spread? 2. The dollar-euro exchange rate is $1.5968 = €1.00 and the dollar-yen exchange rate is ¥108.0030 = $1.00. What is the euro-yen (€/¥) cross rate? 3. The dollar-euro exchange rate is $1.5451 = €1.00 and the dollar-pound exchange rate is $2.0975 = £1.00. What is the euro-pound (€/£) cross rate? 4. The dollar-Swiss Franc exchange rate is $0.8922 = SF1.00 and the dollar-Australian Dollar exchange rate is $0.7620 = AUD1.00. What is the Swiss Franc to Australian Dollar (SF/AUD) cross rate
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This entire homework is worth 2 exam points. Attach/show your work for full credit. You are a trader in Brazil at the Bolsa exchange writing both Calls and Puts. Call and Put options are available on the US dollar with a strike of 2.2R/$ for a premia of .40R and .20R respectively. Assume each contract controls $100‚000. Be sure to draw the payoff and profit/loss diagrams before answering the questions. 1. Which breakeven point is correct? a. Call 2.0 b. Put 2.4 c. Call 2.4 d. Put 1.8 e. Put
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the value of the British pound changes from $1.50 to $1.25‚ then the pound has _________ and the dollar has _________. a. appreciated; appreciated b. depreciated; appreciated c. appreciated; depreciated d. depreciated; depreciated 2. When the exchange rate changes from 1.0 euros to the dollar to 0.8 euros to the dollar‚ then the euro has _________ and the dollar has _________. a. appreciated; appreciated b. depreciated; appreciated
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sells its Volkswagen stock to a French investor‚ U.S. net capital outflow declines (if the French investor pays in U.S. dollars)‚ because the U.S. company is reducing its portfolio investment in a foreign country. 1 8. a. Dutch pension funds holding U.S. government bonds would be happy if the U.S. dollar appreciated. They would then get more Dutch guilders for each dollar they earned on their U.S.
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