For each of the following events/items, state whether the impact is positive (+), negative (-) or no impact (0). a) A Malaysian company borrows in Euros from Deutsche Bank. The loan is repayable in six months. The Ringgit appreciates against the Euro. b) What happens if the loan in (a) above is repayable in one lump sum in five years from now and the Euro now appreciates against the Malaysian Ringgit? c) A Malaysian mutual fund invests in an Australian ETF (exchange traded fund). The Australian Dollar appreciates against the Malaysian Ringgit.

For each of the following events/items, state whether the impact is positive (+), negative (-) or no impact (0). a) A Malaysian company borrows in Euros from Deutsche Bank. The loan is repayable in six months. The Ringgit appreciates against the Euro. b) What happens if the loan in (a) above is repayable in one lump sum in five years from now and the Euro now appreciates against the Malaysian Ringgit? c) A Malaysian mutual fund invests in an Australian ETF (exchange traded fund). The Australian Dollar appreciates against the Malaysian Ringgit.

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter20: Short-term Financing

Section: Chapter Questions

Problem 3BIC

See similar textbooks

Similar questions

Looking for help on Journal Entry 7 ( interest expense and foreign exhange loss) and Journal Entry 8 (not payable and foreign exhange loss).
CASE 3. In October 2021, United Corporation obtained a loan amounting to US $ 120,000 for the purchase of machinery and equipment. By the end of the year, one-half of the loan was still unpaid and a ten per cent decrease has taken place. If the foreign loan payable account is correctly reported in the balance sheet at P1,848,000, the rate of exchange at the time the loan was obtained must have been: Group of answer choices a. $1.00 = P27.00 b. $1.00 = P28.00 c. $1.00 = P29.00 d. $1.00 = P30.00
Q6. A financial institution has borrowed a one-year $20 million Eurodollar deposit at an annual interest rate of 1.5 percent. It has invested these proceeds in one-year Euro (€) bonds at an annual rate of 2.5 percent after converting them at the current spot rate of €1.22/$. Both interest and principal are paid at the end of the year. What is the spread earned by the bank at the end of the year if the exchange rate remains at €1.22/$? a) 1.50 percent b) 2.50 percent c) 0.50 percent d) 1 percent e) 2.00 percent
Assume the spot rate between the uk and the US is .€ .6789= $1 while the one year Foward rate is €.6782=$1. The risk free rate in the UK is 3.1 percent. The risk free rate in the U.S is 2.9 percent. How much profit can you earn for the year on a loan of $1,500 by utilizing covered interest abitrage?
You want to borrow in U.S. dollars at a fixed rate of interest to match with your investment cash flows. Bank A offers you to borrow in US dollars at 7% or in Australian dollars at LIBOR + 0.5% per annum (adjusted for the differential impact of taxes). You found that Bank A also offer another customer who requires a floating-rate loan to borrow in US dollars at 7.5% or in Australian dollars at LIBOR + 2.0% per annum. Bank A can arrange a swap between you and the other customer with a net 20-basis-point spread. Design a swap that minimizes your borrowing costs and appears equally attractive to you and the other customer. What rates of interest will you and that customer end up paying? (Provide explanation, list your calculation process and use figure to illustrate the swap structure).
I would appreciate it if this was done in excel please A US bank converts $ 1 million to SF to make an SF loan to a valued customer when the exchange rate was 1.53 SF per USD. The borrower agrees to repay the principal plus 6.25% interest in one year. The borrower repaid SF at loan maturity and when the loan was repaid the exchange rate was 1.63 SF per USD. What was the bank's dollar rate of return?
Assume that a bank has assets located in Germany worth €390 million earning an average of 6 percent. It also holds €190 in liabilities and pays an average of 4 percent per year. The current spot rate is €1.50 for $1. If the exchange rate at the end of the year is €2.00 for $1: a. What happened to the dollar? Did it appreciate or depreciate against the euro (€)?b. What is the effect of the exchange rate change on the net interest margin (interest received minus interest paid) in dollars from its foreign assets and liabilities?c. What is the effect of the exchange rate change on the value of the assets and liabilities in dollars?
3a)A loan of £16,000 is repaid by annual payments of £1,500 each at the end of the year. How long does it take to repay the loan on the basis of an interest rate of 1% p.a.? b)Suppose the payment at t=11 is increased to repay the loan (a balloon payment).What is the value of the payment at t=11? c)Alternatively, the loan may be repaid via a payment at t=12 (a drop payment).What is the value of the payment at t=12? could you please help me with this question
Required:a. Calculate the dollar proceeds from the FI’s loan portfolio at the end of the year, the return on the FI’s loan portfolio, and the net return for the FI if the pound spot foreign exchange rate falls to $1.20/£1 and the lira spot foreign exchange rate falls to $0.156/TL1 over the year.b. Calculate the dollar proceeds from the FI’s loan portfolio at the end of the year, the return on the FI’s loan portfolio, and the net return for the FI if the pound spot foreign exchange rate rises to $1.40/£1 and the lira spot foreign exchange rate rises to $0.17/TL1 over the year.c. Suppose that the FI funds the $250 million U.S. loans with $250 million one-year U.S. CD at a rate of 4 percent; funds $150 equivalent British loans with $150 million equivalent one-year pound CDs at a rate of 5 percent; funds $100 million equivalent Turkish loans with $100 million equivalent one-year Turkish lira CDs at a rate of 6 percent. Assume no other changes. What will the FI’s balance sheet look like…
A European firm borrows MXN from a Mexico bank at a 7% interest rate. Over that same time, the Euro appreciates 2.70% against the MXN. What is the European firm's €-denominated equivalent cost of borrowing?
Assume that a bank has assets located in Germany worth €150 million earning an average of 8 percent. It also holds €100 in liabilities and pays an average of 6 percent per year. The current spot rate is €1.50 for $1. If the exchange rate at the end of the year is €2.00 for $1, ( LG 19-1) a. What happened to the dollar? Did it appreciate or depreciate against the euro (€)? b. What is the effect of the exchange rate change on the net interest margin (interest received minus interest paid) in dollars from its foreign assets and liabilities? c. What is the effect of the exchange rate change on the value of the assets and liabilities in dollars?
First America Bank’s monthly payment charge on a 48-month, $19,000 loan is $528.26. The U.S. Bank’s monthly payment fee is $537.70 for the same loan amount. What would be the APR for an auto loan for each of these banks?