A) Assume you are an exporter and youwant to sell USD that you havereceived as export remittance. Thebank quotes a price of 65.10 / 65.12for USDINR. At what price can you sellone unit of USD?B) Sultan sells a USD call option at strikeof 65.8 and receives a premium of INR0.3. What would be the breakevenpoint for the transaction?C) Assume that price of a USDINR calloption is quoted as INR 0.25 /0.27 (bidprice / ask price). Given this quote, atwhat price could a company buy thecall option?D) Use the following exchange rates toanswer the following questions?(a) €1 = US$0.8420(b) £1 = US$1.4565(c) NZ$1 = US$O.4250US$1= €?US$1 = £?US$1 = NZS"Foreign direct investment (EDU in the

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Answered: A) Assume you are an exporter and you…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The following rates are available to you. (You may either buy or sell at these rates). Assume you have a $1,000,000 to trade. Quote for Japanese Yen US $ quote for British Pound Yen quote for British Pound Given this information, is triangular currency arbitrage possible? BOA Barclays Bank Daiwa Bank A. Yes, start by selling US dollars at Barclays Bank OB. Yes, start by selling British pounds at Daiwa Bank No, triangular currency arbitrage is not possible. O D. Yes, start by selling US dollars at BOA O C. US$ 0.009472/ US$ 1.3670/£ 142.45/£
2. Complete the following table specifying the under and over valuation for each set of currencies. Show all your procedure for each answer: Real E.R. Theoretical E.R. % of % of Undervaluation Overvaluation (specify currency) (specify currency) USD 1.14 / EUR USD 1.52 / Punt TRY 4.85 / USD MXP 17.90 / USD USD 0.012 / JPY ¥ GBP {0.629 / USD USD 1.70 /EUR USD 1.50 / Punt TRY 4.73 / USD MXP 18.15 / USD USD 0.019/ JPY ¥ GBP (0.613/USD
Suppose you have developed a hairbrained scheme to purchase art, mint a NFT, and then sell it for a bubbly profit. For your scheme, you need to import USD 99570.85 worth of art into Australia. You are concerned that the exchange rate might move adversely during this time. Suppose the current exchange rate is 0.704 You see the following instruments available: • A Put option on AUD with a strike price (in USD/AUD) of 0.6 with a 1.3% premium • A Call option on AUD with a strike price (in USD/AUD) of 0.88 with a 1.7% premium • A forward rate agreement with a FRA rate of 3.5% • A customized forward forward arrangement of 4% Suppose you decide to hedge with the most relevant instrument. Assume that the USD/AUD exchange rate becomes 0.45. What is the overall cost of the art purchase in AUD, including any fees? O a. 163794.04825 O b. 113148.69318 O c. 165951.41667 O d. None of these options O e. 111225.16540 O f. Not enough information O g. 164656.99562
You are the treasury department of a JFINEX Bank and your client has some excess Euros. If he wants to sell EUR to you, what will be your EUR buying rate if you want 0.020 spread assuming the inter-bank market quote is EUR/USD 1.1580 - 1.6100? 1.1560 1.5900 1.1380 1.6300
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Assume the time from acceptance to maturity on a $2,280,000 banker’s acceptance is 90 days. Further assume that the importing bank’s acceptance commission is 1.25 percent and that the market rate for 90-day B/As is 7 percent. Determine the amount the exporter will receive if he holds the B/A until maturity and also the amount the exporter will receive if he discounts the B/A with the importer’s bank.
Company A wants to borrow US Dollar (USD) at a floating rate of interest and Company B want to borrow Australian Dollar (AUD) at a fixed rate of interest. They have been quoted the following rates by Bank C. USD AUD Company A LIBOR +0.5% 5.0% Company B LIBOR+1.0% 6.5% Develop an interest rate swap that will net the bank 50 basis point spread and will appear equally attractive to Company A and Company B. Explain your answer.
You sold goods for USD 2 million and expected to receive the proceeds in 2 months. You entered into a forward exchange contract (“FEC”) at AUD/USD 0.9600. You have been advised your customer cannot pay the USD 2m until 3 months after the FEC date. Your bank agrees that you can extend your FEC at the historical rate. Current spot rate is AUD/USD 0.8800 with USD and AUD interest rates 1% pa and 6% pa respectively. What is the approximate amount of AUD you will now receive at the revised future date: Select one: A. AUD 2,301,000 B. AUD 2,083,000 C. AUD 2,273,000 D. AUD 2,109,000
Q1. Suppose a Bangladeshi exporter is expecting to receive $15 million sometime in the next three months from an American importer. To hedge this, the Bangladeshi exporter buys an option on the USS. The premium is 0.55 BDT/USS, for options with Exercise price = 0.551 a) What option should he buy? b) What is the cost incurred today by the Bangladeshi exporter? c) ) What is the price floor that the exporter has set on the price of US$ 84.5 BDT/USS.? d) What is the actual amount that the exporter will receive if the spot rate at the end of three months is 85.5 BDT/USS? e) What is the actual amount that the BD exporter will receive if the spot rate at the end of three months is 84.5 BDT/USS? Q2. Suppose a Bangladeshi importer is expecting to pay $15 million sometime in the next three months to an American exporter. To hedge this, the Bangladeshi importer buys an option on the US$. The premium is 0.75 BDT/US$, for options with Exercise price = 86.5 BDT/US$. a) What option should he buy? b)…
Mr. Sami approached his FOREX trader and was informed that the spot rate is EUR 2.1565/OMR. The trader stated that this exchange rate is expected to change after one month specifically the OMR may appreciate by 1%. What will be the value of EUR against OMR? O a. EUR/OMR= 0.4591 O b. OMR 0.6491/EUR O C EUR 0.5419/OMR O d. 1 OMR= 0,4591 EUR
You can _____ a euro call and ______ a euro put if you expect the euro to depreciate. A. buy; buy B. sell; buy C. buy; sell D. sell; sell
In New York, you can exchange $1 for €0.8575 or £0.7. Suppose that, in Berlin, £1 costs €1.1515. How much profit can you earn on $10,998 using triangle arbitrage?

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