TASK #2Ganado Corporation recently received a payment for one of the consignmentsit exported to Europe, It has 2,000 Euros (€ or EUR) with it. Wanting toexchange all of these for Russian rubles(R or RUB) since it will be importing anew machine from a merchant in Fussia, it obtains the following quotes:Spot rate USD=1.00 EUR (or $/€)Spot rate RUB=1.00 USD (or R/S)a. What is the Russian ruble to euro crossrate?b. How many Russian rubles will you obtain for your Euros?1.128062.40 Ganado Corporation recently received a payment for one of the consignmentsit exported to Europe, It has 2,000 Euros (€ or EUR) with it. Wanting toexchange all of these for Russian rubles(R or RUB) since it will be importing anew machine from a merchant in Russia, it obtains the following quotes:Spot rate USD=1.00 EUR (or $/€)Spot rate RUB=1.00 USD (or R/S)a. What is the Russian ruble to euro crossrate?b. How many Russian rubles will you obtain for your Euros?1.128062.40

A cross currency rate is the rate which is used and computed so that a rate can be determined…

Answered: Ganado Corporation recently received a…

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 U.S. consumer observes that a golf club costs $200. Currently in the spot market, 1 eurocan be exchanged for $1.1924. If purchasing power parity (PPP) holds, how many eurosshould you expect to pay for the same golf club in Europe?
Victoria Exports (Canada). A Canadian exporter, Victoria Exports, will be receiving six payments of €13,400, ranging from now to 12 months in the future. Since the company keeps cash balances in both Canadian dollars and U.S. dollars, it can choose which currency to exchange the euros for at the end of the various periods. Which currency appears to offer the better rates in the forward market? (Click on the icon to import the table into a spreadsheet.) U Period spot 1 month 2 months 3 months 6 months 12 months Period Days Forward Spot 1 month 2 months Days Forward 30 60 90 180 360 0 30 60 Calculate the forward premium, the Canadian dollar proceeds, and the difference from the spot rate proceeds in the C$/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…
K1. A Polish currency dealer has good credit and can borrow either €1,600,000 or $2,000,000 for one year. The one-year interest rate in the U.S. is i$ = 6% and in the euro zone the one-year interest rate is i€ = 2%. The spot exchange rate is $1.20 = €1.00 and the one-year forward exchange rate is $1.25 = €1.00. Show how you can realize a certain euro profit via covered interest arbitrage. Group of answer choices Borrow $2,000,000 at 6%; trade $2,000,000 for €1,666,667 at the spot rate; invest euros at i€ = 2%; translate euro proceeds back to dollars at the forward rate of $1.25 = €1.00 for gross proceeds of $2,125,000. Net profit will be $5,000. Borrow $2,000,000 at 6%; trade $2,000,000 for €800,000 at the spot rate; invest euros at i€ = 2%; translate euro proceeds back to dollars at the forward rate of $1.20 = €1.00. Net profit will be $17,600. Borrow €1,600,000 at i€ = 2%; translate euros to dollars at the spot rate, invest dollars in the U.S. at i$ = 6% for one year;…
You are US company, 500,000 BP (British Pound) payable to UK in one year. Answer in terms of US$. Information for Forward Contract: Forward exchange rate (one yr): 1.54 $/BP Information for Money Market Instruments (MMI): Current exchange rate: 1.50 $/BP Investment return at Aerion Fund Management (in UK): 4% annual Interest rate of borrowing from Bank of America (in USA): 2% annual Information you need for Currency Options Contract: Options premium: 0.015 $/BP Interest rate of borrowing from Bank of America (USA): 2% annual Allowed to exercise options at 1.54 $/BP What are the costs of MMI? (Answer in US$ of course. You are US company!) Group of answer choices None of the above $789,343 $735,504 $770,082 $783,452
On December 20, 2020, Momeier Company (a U.S.-based company) sold parts to a foreign customer at a price of 175,000 rials. Payment is received on January 10, 2021. Currency exchange rates are as follows: Date U.S. Dollar per Rial December 20, 2020 $ 1.27 December 31, 2020 1.24 January 10, 2021 1.20 How does the fluctuation in the U.S. dollar per rial exchange rate affect Momeier’s 2020 income statement?
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Xios trades regularly with customers worldwide. Its home currency is the dollar. The company is expecting to receive €1.6 million in 6 months’ time from an aboad customer.Current exchange rates in the home country of Xios are: Exchange rate Euro Per dollarSpot 0.9431-0.94566-month forward 0.9360- 0.939412-month forward 0.9368-0.9406 a) If the current spot rate at the end of 6 months is 1 dollar = Euros 0.9325-0.9400, comment on Xios's hedging decision. b) Discuss whether Xios should avoid exchange rate risk by invoicing abroad customers in dollars.
Brandlin company of anaheim, california, sells parts to a foreign customer on december 1, 2017, with payment of 24,000 korunas to be received on march 1, 2018. Brandlin enters into a forward contact on december 1, 2017 to sell 24,000 korunas on march 1, 2018. Relevant exchange rates for the korunas on various dates are as follow: date spot rate forward rate december 1, 2017 4.20 4.275 december 31, 2017 4.30 4.400 march 1, 2018 4.45 n/a brandli's incremental borrowing rate is 12 percent. The present value factor for two months at annual interest rate of 12 percent (1 percent per month) is 0.9803. Brandlin must close its books and prepare financial statements at december 31. 1. Assuming that brandlin designates the forward contract as a cash flow hedge of a foreign currency receivable and recognizes any premium or discount…
On December 20, 2023, Momeier Company (a U.S.-based company) sold parts to a foreign customer at a price of 165,000 rials. Payment is received on January 10, 2024. Currency exchange rates are as follows: DateU.S. Dollar per RialDecember 20, 2023$ 1.26December 31, 20231.23January 10, 20241.19 Required: How does the fluctuation in the U.S. dollar per rial exchange rate affect Momeier's 2023 income statement? How does the fluctuation in the U.S. dollar per rial exchange rate affect Momeier's 2024 income statement? a. The rial receivable exchange b. The rial receivable exchange S in U.S. dollar value, resulting in a foreign of in 2023. in U.S. dollar value, resulting in a foreign of in 2024.

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