A. An exporter in the U.S is planning to ship $10,000,000 worth of automobiles to Germany in 6 months. What kind of foreign currency event should the exporter hedge against? What could happen if the exporter did not hedge? B. The selling price of 3-month forward U.K. pound sterling is $1.7107 and, the spot rate for pounds the selling price is $1.8953. Calculate the per annum percentage premium or discount in the forward rate.

A. An exporter in the U.S is planning to ship $10,000,000 worth of automobiles to Germany in 6 months. What kind of foreign currency event should the exporter hedge against? What could happen if the exporter did not hedge? B. The selling price of 3-month forward U.K. pound sterling is $1.7107 and, the spot rate for pounds the selling price is $1.8953. Calculate the per annum percentage premium or discount in the forward rate.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

2- According to purchasing-power parity, inflation in the U.S. causes the dollar to a) depreciate relative to all other currencies. b) depreciate relative to currencies of countries that have lower inflation rates. appreciate relative to all other currencies. () d) appreciate relative to currencies of countries that have lower inflation rates Leave blank 3- Which of the following is correct? a) b) The maturity of a bond refers to the amount to be paid back. The principal of the bond refers to the person selling the bond A bond buyer cannot sell a bond before it matures. c) d) None of the option is correct. Leave blank
A foreign exchange trader with a U.S. bank took a speculative long position of £6,000,000 when the GBP/USD was 1.3233. Subsequently, the exchange rate has changed to 1.3342. If the position is closed now, what is the profit/loss arising from that trade? (USD, no cents)
A Sri Lankan MNC that is an importer has a $3,750,000 payable due in one year. Spot exchange rates 1-year Forward Rates Contract size $ 1.00 Rs. 100 $ 1.00 = Rs. 120 Rs. 12,500,000 What is a strategy that will hedge this Sri Lankan firm's exchange rate risk? A. Go short in 36 rupee forward contracts. B. Go long in 36 rupee forward contracts. C. Go short in 30 rupee forward contracts. D. Go long in 30 rupee forward contracts. E. None of the options
What is meant by the balance of trade? 10 13 16 V 19 22 25 14 17 20 23 12 15 18 21 24 a It is the measurement of the barter of products for products. b) It is the relative value of one currency to that of another. ( c) It is a measure of the total flow of money into or out of a country. ) d) It is a measure of the difference between exports and imports.
2. Analyze the data from China, Japan, Switzerland, Indonesia, Ukraine, and Taiwan (6 countries), and fill in the table as follow showing overvalued and undervalued currencies. (10%) Write a conclusion stating why PPP doesn't hold true according to the actual data. (10%) Country Local dollar Implied PPP Actual of the dollar price 1 United States China Indonesia Switzerland Ukraine Taiwan 5 20 30000 6.5 54 69 exchange rate 1 6.8 14000 0.9 28 30 Under/over against the dollar 0% valuation
a) Using the following information, determine each one of the theoretical Exchange Rates (E.R.) according to International Fisher Effect. b) Show how Money Market Arbitrage could be done assuming that the loan is 1,000 units of the currency of the country where the loan is contracted. Determine the profit in the currency in which the loan was contracted. ΜARKET ΜARKET E.R. E.R. COUNTRY CURRENCY INTEREST Dec-01 Dec-02 Dec-02 Mexico MXP 12 % 19.56 20.15 Turkey TRY (Lira) 6 % 5.9419 6.07673 Australia AUD 4 % 1.7759 1.81183 Jаpan JPY 8 % 105.866 113.978 United GBP 5 % 0.5991 0.617849 Kingdom (UK) South Korea KRW (Won) 9% 1,658.62 1,793.37 Canada CAD 5 % 1.3736 1.4942 U.S.A.. USD 3%
5
Urgent!!
6) The value of 100 South Korean Won (KRW) against the Japanese Yen (JPY) rose from9.7730 in May 2014 to 11.1710 on May 1, 2015. What was the percentage change inits value?
A Japanese tourist rents a hotel room in London. The impact on BOP will be debit for Japan current account (-) and a credit for UK current account (+). True or False?
1) Assume Turkish lira (TL) is expected to depreciate by 10% over the next year against US dollar. If the Turkish interest rate is15%, what would be the US interest rate that can make a Turkish investor to be willing to buy US securities today? Assume capital is perfectly mobile between Turkey and US. 2-) If the price level of Turkish goods is 200, the price level of foreign goods is 125, and the lira price of foreign currency is 1.20, what is the real exchange rate? What is the meaning of this rate for the competitiveness of Turkish goods? 3-)With the help of an IS-LM diagram show and explain the effect of restrictive monetary policy on output under flexible exchange rates and perfect capital mobility
7, If the interest rate is 8% in the US and 5% in Europe, then according to the interest rate parity theory, in the long run: (a) Will the dollar appreciate or depreciate with respect to the euro? (b) By what percent?