A bank in London, Ontario charges 3.25% commission to buy and sell currencies.Assume that the current exchange rate is US$1 = C$1.3351.a. How many Canadian dollars will you receive from the bank if you sell US$1,370?Round to the nearest centb. How much commission will you pay the bank for this transaction?Round to the nearest cent

Current exchange rate means the rate at which one currency can be sold in exchange of another…

Answered: A bank in London, Ontario charges 3.25%…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A bank in London, Ontario has a buying rate of CHF 1 = C$1.3547. If the exchange rate is CHF 1 = C$1.3841, calculate the rate of commission that the bank charges.
2. Money Market Hedge on Receivables Assume that Parker Company will receive 200,000 Canadian dollars in 360 days. Assume the following interest rates: 360-day borrowing rate 360-day deposit rate U.S. 6% 4% Canada 5% 3% Assume the forward rate of the Canadian dollar is $.80 and the spot rate of the Canadian dollar is $.78. If Parker Company uses a money market hedge, how much U.S. dollars will it receive in 360 days from its Canadian dollar receivable? (round to whole dollars) (2 points)
Assume the time from acceptance to maturity on a $2,280,000 banker’s acceptance is 90 days. Further assume that the importing bank’s acceptance commission is 1.25 percent and that the market rate for 90-day B/As is 7 percent. Determine the amount the exporter will receive if he holds the B/A until maturity and also the amount the exporter will receive if he discounts the B/A with the importer’s bank.
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Victoria Exports (Canada). A Canadian exporter, Victoria Exports, will be receiving six payments of €13,400, ranging from now to 12 months in the future. Since the company keeps cash balances in both Canadian dollars and U.S. dollars, it can choose which currency to exchange the euros for at the end of the various periods. Which currency appears to offer the better rates in the forward market? (Click on the icon to import the table into a spreadsheet.) U Period spot 1 month 2 months 3 months 6 months 12 months Period Days Forward Spot 1 month 2 months Days Forward 30 60 90 180 360 0 30 60 Calculate the forward premium, the Canadian dollar proceeds, and the difference from the spot rate proceeds in the C$/Euro forward market below: (Round the forward premium to three decimal places and the Canadian dollar amounts to the nearest cent.) C$/euro C$/euro 1.3337 1.3364 1.3386 1.3412 1.3437 1.3461 1.3337 1.3364 1.3386 US$/euro 1.3217 1.3220 1.3222 1.3225 1.3230 1.3256 Forward Premium on the…
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
The treasurer of a major U.S. firm has $41571485 to invest for three months. The annual interest rate in the United States is 0.25% per month. The interest rate in Great Britain is 0.63% per month. The spot exchange rate is £0.72, and the three-month forward rate is £0.74. Ignoring transaction costs, what would be the NPV of investing in Great Britain as opposed to invest in the U.S.?
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5. Suppose that you have local currency equivalents of the following accounts: Savings account $10,000 • Current Account $10,000 • CD (one year maturity) $15,000 • CD (five year maturity) $17,500 plus the following foreign currency accounts: • $10,000 • £10,000 Suppose the bank fails. How much can you expect to recover/to lose from deposit insurance given deposit insurance in the jurisdictions in which you have been assigned? What percent did you, as the depositor, actually recovery of the total sums that were deposited at the failed bank (with all foreign currency accounts converted into the relevant local currency)?
A bank in London, Ontario charges 2.50% commission to buy and sell currencies. Assume that the current exchange rate is US$1 = C$1.3599. a. How many Canadian dollars will you receive from the bank if you sell US$1,340? Round to the nearest cent b. How much commission will you pay the bank for this transaction? Round to the nearest cent

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