more long-term Eurodollar debt which then swap in to yen liabilities * This alternative will make Disney facing even higher debt ratio. * Issuing Euro-yen bonds * Disney was ineligible to issue this instrument according to Japanese regulations. Among those alternatives mentioned above‚ there are only two alternatives left which are considered to be the most attractive ways and; thus‚ they be evaluated as follows: 1. Create YEN liability directly in Japan 2. Issue ECU bond
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revenues and production being derived from North America‚ depreciating yen rates pose problems for the firm indirectly through economic exposure. While GM possesses ‘passive’ hedging strategies for balance sheet and income statement exposures‚ management has not yet quantified or recognized solutions to possible losses from the indirect competitive exposure it now shared with Japanese automakers in the U.S import market. As the yen depreciates against the dollar‚ Japanese automakers production cost
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more products in the United States‚ Europe and from suppliers in Asia because Sony needs to remain a globally diversified corporation. The Yen stability against the US dollar has had a negative impact on the financial stability of Sony. When Sony translated US dollars and Euro financial statements into Yen‚ the net assets and earnings ended up being worth less in Yen which in turn dropped Sony’s financial results. Sony needs to work on spreading more marketing throughout Asia‚ Europe and the United States
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Due to the fluctuations of yen/dollar exchange rate‚ the new distribution agreement with Mitsukoshi gave rise to high exchange-rate exposure for Tiffany to bear. The exposure goes in the following two ways: Economic Exposures. From 1983 to 1993‚ the yen/dollar exchange rate was along a down turn path (see Exhibit 1). In the past‚ Tiffany wholesaled its products to Mitsukoshi. Since the wholesale transactions were denominated entirely in dollars‚ yen/dollar exchange rate fluctuations did not represent
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INSTRUCTOR’S MANUAL: MULTINATIONAL FINANCIAL MANAGEMENT‚ 9TH ED. CHAPTER 7 SUGGESTED ANSWERS TO CHAPTER 7 QUESTIONS 1. Answer the following questions based on data in Exhibit 7.5. a. How many Swiss francs can you get for one dollar? ANSWER. The indirect quote is $1 = SFr 1.0534. b. How many dollars can you get for one Swiss franc? ANSWER. The direct quote is SFr1 = $0.9493. c. What is the three-month forward rate for the Swiss franc? ANSWER. The three-month forward
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currency transaction occurs when a transaction is denominated in a currency other than that of the firm. For example‚ a foreign currency transaction occurs when a U.S. firm purchases electronics components from a Japanese firm and must make payment in yen. 3. This easiest way for a U.S. company to avoid foreign exchange risk is to denominate all transactions in U.S. dollars. Alternatively‚ there are a variety of methods for hedging foreign currency risk. One method is to enter into a foreign exchange
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1.If the spot rate for Japanese Yen is 85 Yen equals 1 US $‚ and the annual Yen interest rate on fixed rate one-year deposits of Yen is 0.25% and for US$ is 1.5%‚ what is the nine-month forward rate for one dollar in terms of Yen? Assuming the same interest rates‚ what is the 18-month forward rate for one Yen in dollars? Is this an indirect or a direct rate? If the forward rate is an accurate predictor of exchange rates‚ in this case will the Yen get stronger or weaker against the dollar
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CHAPTER 1 Introduction Practice Questions Problem 1.1 What is the difference between a long forward position and a short forward position? When a trader enters into a long forward contract‚ she is agreeing to buy the underlying asset for a certain price at a certain time in the future. When a trader enters into a short forward contract‚ she is agreeing to sell the underlying asset for a certain price at a certain time in the future. Problem 1.2. Explain carefully the difference
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Multiple Choice: Conceptual Easy: International operations motivation Answer: e Diff: E . Which of the following are reasons why companies move into international operations? a. To take advantage of lower production costs in regions of inexpensive labor. b. To develop new markets for their finished products. c. To better serve their primary customers. d. Because important raw materials are located abroad. e. All of the statements above are correct. Multinational financial management
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move forward to hedging Blades’ yen payables position‚ the advantages and disadvantages associated with purchasing derivatives instruments such as call options and future contracts‚ the use of the market consensus of the future yen spot rate provided to determine the optimal hedge for the firm and the danger and/or value of using derivatives as a risk management tool (Madura‚ 2009). B) Section A-Should Ben Holt be advised to move forward to hedge Blades’ yen payables position? Why? It would
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