Kiambu County Government has received equipment worth Kshs.461,520,000 from anAmerican Company priced in American dollars at the spot rate on a three month credit periodKiambu County Government has all its money tied up in its operations but it could borrow inKenya if necessary.Given:Interest rates (Quarterly)USA4%2.5%KenyaExchange ratesSpot: $1/Kshs.76.22 -76.923 month forward $1/Kshs.64.23-64.93There is a three month dollar cali option at a premium of $25,000 at an exercise price ofKshs.66.53.Required:Using suitable computations, illustrate three strategies available to Kiambu CountyGovernment in managing this exposure and advice on the suitable techniques.

Foreign exchange risk It is the losses that a international monetary exchange might bring about…

Answered: Kiambu County Government has received…

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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Sun Bank USA has purchased a 16 million one-year Australian dollar loan that pays 12 percent interest annually. The spot rate of U.S. dollars for Australian dollars (AUD/USD) is $0.757/A$1. It has funded this loan by accepting a British pound (BP)-denominated deposit for the equivalent amount and maturity at an annual rate of 10 percent. The current spot rate of U.S. dollars for British pounds (GBP/USD) is $1.320/£1. a. What is the net interest income earned in dollars on this one-year transaction if the spot rate of U.S. dollars for Australian dollars and U.S. dollars for BPs at the end of the year are $0.715/A$1 and $1.520/£1, respectively? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers in dollars, rather than in millions of dollars. Round your final answer to the nearest whole dollar. (e.g., 32)) b. What should the spot rate of U.S. dollars for BPs be at the end of the year in order for the bank to earn a net interest…
A foreign exchange dealer in Kigali Rwanda provides quotes for the spot and 3 month forward rates for the RFr against the dollar. Bid (RFr/U$$) ask (RFr/U$$) Spot 4.0040 4.0200 3-month forward 3.9690 3.9888 Required: a. What would you receive in dollars if you sell RFr 5 million at the spot rate? b. What would it cost in dollars to purchase RFr 20 million forward 3 month? When would you make payment?
. AU.S. bank can earn 6% on dollar loans or 8% on pound denominated loans to British concerns. The bank currently has $500 million in dollar loans and British pound loans equivalent to $400 million. The loans are funded by dollar denominated CDs paying 4%. All loans and CDs are on single payment terms. The current spot rate for pounds is S1.8604 and the one year forward rate is $1.8405.TWhat is the bank's spread if they fully hedge their exposure to pounds?
Required: Zeda Incorporated, a U.S. MNC, is considering making a fixed direct Investment In Denmark. The Danish government has offered Zeda a concessionary loan of DKK14,150,000 at a rate of 4 percent per annum. The normal borrowing rate is 6 percent in dollars and 5.5 percent in Danish krone. The loan schedule calls for the principal to be repaid in three equal annual Installments. What is the present value of the benefit of the concessionary loan? The current spot rate is DKK 5.60 per $1.00 and the expected inflation rate is 3 percent In the United States and 2.5 percent in Denmark. Note: Round the exchange rates to two decimal places. Round the Intermediate calculations and final answer to nearest whole number. Answer is complete but not entirely correct. Present value of the benefit of the concessionary loan S 850,918
On December 20, 2023, Momeier Company (a U.S.-based company) sold parts to a foreign customer at a price of 165,000 rials. Payment is received on January 10, 2024. Currency exchange rates are as follows: DateU.S. Dollar per RialDecember 20, 2023$ 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.
Sonic Master Sendirian Berhad uses Singapore Dollars (SGD) as the main currency as a transaction whereas Keep Calm Sendirian Berhad is using Australian Dollars (AUD). In 4 years, payment of SGD 3,400,101 by Sonic Master Sendirian Berhad has to be made to Keep Calm Sendirian Berhad. Exchange rate fluctuations between the SGD and AUD causes the company to fix it's payable and receivable in AUD. The annual interest rates are 6% and 8% for AUD and SGD respectively. The spot exchange rate is 1.86 units of SGD per 1 unit of AUD. Determine the 360-day forward rate by using a money market hedge:
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): 6% 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!)
2 XYZ Company sells goods to a foreign customer on June 8. Payment of 3,000,000 foreign currency units (FC) is due in one month. June 30 is XYZ Company’s fiscal year-end. The following exchange rates were in effect during the period: June 8 Spot rate $1.10 June 8 30 day forward rate $1.15 June 30 Spot rate $1.14 July 8 Spot rate $1.20 A For what amount should XYZ Accounts Receivable be debited on June 8 B How much foreign exchange gain or loss should XYZ record on June 30
A Detroit investor purchased a $100,000 Canadian dollar CD in Windsor, Canada 180 days ago at a rate of 7 percent. The Canadian spot rate was 1.367 CS/U.S.S when the investment was made. If the U.S. investor had purchased a 180 day forward foreign exchange contract for 1.386 CS/U.S.S. what equivalent U.S. annual rate 180 days ago would have made the investor indifferent between a Detroit bank CD and the Windsor, Canada CD above? CA 5.53 percent 3.50 percent Oc7.00 percent 04.16 percent
OneUSF, a U.S. MNC based in Florida, is considering making a fixed direct investment in Italy. The Italian government has offered OneUSF a concessionary loan of €2,700,000 at a rate of 3 percent per annum. The current spot rate is $1.31/€1.00 and the expected inflation rate is 2.5% in the U.S. and 2% in Italy. The normal borrowing rate is 6 percent in dollars and 5.5 percent in euros. The loan schedule calls for the principal to be repaid in three equal annual installments. The marginal corporate tax rate in Italy and the U.S. is 35%. What is the present value of the benefit of the concessionary loan? W $143.174 $984,145 $111,756 None of the above with the $10,000 of the correct answer $1,131,289
Vicky Gomez, a foreign exchange trader at Wells Fargo, can invest $1M, or the foreign currency equivalent of the bank's short term funds, in an uncovered or covered interest arbitrage with the United Kingdom. Arbitrage funds available to invest: $1M( or the equivalent in pounds) Spot rate ($/Ł) : 1.9422 90-day forward exchange rate ($/Ł): 1.9150 Expected 90-day spot exchange rate ($/Ł): 1.8810 U.S. dollar 90-day interest rate: 2.000% U.K. pound 90-day interest rate: 5.900% A.Should Vicky make an covered investment in the UK? Show work and give answer. B. Shoudl Vicky make an uncovered investment in the UK? Show work and give answer.

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