Display “Please make a selection” Display “international Currency Types:” Display “1: Canadian Dollars” Display “2: Mexican Pesos” Display”3: English Pounds” Display “4: Japanese Yen” Display “5: French Francs” Display “6: Quit: Display “Enter a selection:”; Input Currency Type
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"The Five-Hundred-Pound Reading Packet." Joyce Ladson Strategies for Success-200 Week 5 1. How would you advise Delila to prepare for her course reading? In order for Delila to prepare for her course reading‚ the first thing I think she should do is see if the packet has an introduction page. If there is an introduction page there’s usually a summary on that page of what to expect in the packet. I would then break the assignment down into segments. Each segment would be designated to a
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1) Assume the spot rate of the British pound is $1.73. The expected spot rate one year from now is assumed to be $1.66. What percentage depreciation does this reflect? [$1.66 – $1.73]/$1.73 = –4.05% Hence‚ the expected depreciation is 4.05%. 2) Assume that the U.S. inflation rate becomes high relative to Canadian inflation. Other things being equal‚ how should this affect the (a) U.S. demand for Canadian dollars‚ (b) supply of Canadian dollars for sale‚ and (c) equilibrium value of the
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inflation in the dollar to the British pound has severe implications for the profit potential on this project. Dozier currently has four different alternatives they can choose to do; they can do nothing‚ use a forward contract‚ use a money market hedge‚ or buy options. Do Nothing If Dozier Industries elects to do nothing they have no control over whether the project earns a profit or suffers from a loss. Using this strategy Dozier is hoping that the British pound will regain value against the dollar
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profit per unit = –$.05 Net Profit = 50‚000 units × (–$.05) = –$2‚500 2. Speculating with Currency Put Options. Alice Duever purchased a put option on British pounds for $.04 per unit. The strike price was $1.80 and the spot rate at the time the pound option was exercised was $1.59. Assume there are 31‚250 units in a British pound option. What was Alice’s net profit on the option? ANSWER: Profit per unit on exercising the option = $.21 Premium paid per unit = $.04 Net profit per
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Chapter 4 Exchange Rate Determination 1. The value of the Australian dollar (A$) today is $0.73. Yesterday‚ the value of the Australian dollar was $0.69. The Australian dollar _______ by _______%. A) depreciated; 5.80 B) depreciated; 4.00 C) appreciated; 5.80 D) appreciated; 4.00 ANSWER: C SOLUTION: ($0.73 – $0.69)/$0.69 = 5.80% 2. If a currency’s spot rate market is _______‚ its exchange rate is likely to be _______ to a single large purchase or sale
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4. Would any of the hedges you compared in question 2 for the British pounds to be received in 90 days require Blades to overhedge? Given Blades’ exporting arrangements‚ do you think it is subject to overhedging with a money market hedge? Since Ben Holt want to hedge all the exposure and there are 31‚250 pounds in a put option. However‚ Blades will receive 4‚000‚000 pounds in 90 days and it will need to purchase 128 put options to cover this exposure. In this case‚ none of the hedges would require
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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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be not considered. D) none of these. 4. Which of the following reflects a hedge of net receivables in British pounds by a U.S. firm? A) purchase a currency call option in British pounds. B) buy pounds forward. C) borrow U.S. dollars‚ convert them to pounds‚ and invest them in a British pound deposit. D) purchase a current put option in British pounds OR sell pounds forward 5. If Lazer Co. desired to lock in the maximum it would have to pay for its net payables in euros but wanted
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of the pound Depending on how strong the UK pound is determines how well the country’s economy is; if the pound is strong this means the country is doing well and vice versa. However this also has an effect on the number of people that visit the UK‚ a strong pound actually deters overseas visitors due to them receiving fewer pounds when exchanging their own money as one UK pound is worth more than one of their currency. 2010 Exchange rates http://www.xe.com/ 25/11/10 When the pound is weak
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