Q3. Cold Storage Malaysia Sdn Bhd needs to pay AUD 575,000 in 2 months time for the purchase of fresh fruits and vegetables from an Australian supplier. Knowing that it is exposed to fluctuations in AUD/MYR exchange rate, Cold Storage is considering the following alternatives: Alternative 1: Do nothing, i.e. to wait until the AUD is due to be paid in 2 months' time and to buy the amount required at whatever spot rate at that time. Alternative 2: Hedge by entering into an FX forward contract. i. Explain what Cold Storage need to do if Alternative 1 were selected. ii. Again if Alternative 1 were to be used, calculate the amount in MYR that Cold Storage would pay in 2 months from now under the different AUD/MYR exchange rate scenarios at maturity by filling up the blank spaces in the following Table 1. Also compute potential gain or loss to Cold Storage in MYR in each scenario. If Spot Rate at Maturity is... 3.1000 3.1050 3.1100 3.1150 Table 1 Gain/ (Loss) MYR per AUD 0.0085 0.0035 (0.0015) (0.0065) Amount To Be Allocated in MYR 1,782,500 1,785,375 1,788,250 1,791,125

Q3. Cold Storage Malaysia Sdn Bhd needs to pay AUD 575,000 in 2 months time for the purchase of fresh fruits and vegetables from an Australian supplier. Knowing that it is exposed to fluctuations in AUD/MYR exchange rate, Cold Storage is considering the following alternatives: Alternative 1: Do nothing, i.e. to wait until the AUD is due to be paid in 2 months' time and to buy the amount required at whatever spot rate at that time. Alternative 2: Hedge by entering into an FX forward contract. i. Explain what Cold Storage need to do if Alternative 1 were selected. ii. Again if Alternative 1 were to be used, calculate the amount in MYR that Cold Storage would pay in 2 months from now under the different AUD/MYR exchange rate scenarios at maturity by filling up the blank spaces in the following Table 1. Also compute potential gain or loss to Cold Storage in MYR in each scenario. If Spot Rate at Maturity is... 3.1000 3.1050 3.1100 3.1150 Table 1 Gain/ (Loss) MYR per AUD 0.0085 0.0035 (0.0015) (0.0065) Amount To Be Allocated in MYR 1,782,500 1,785,375 1,788,250 1,791,125

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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ASAP If answer is correct I'll give you Upvote. Caculation: A company exports commodity X to Canada, if the total purchase price(including VAT 17%) is RMB 247500, the rate of expense standard is 5%, the rate of export tax rebate is 14%, the total freight is USD245.00, the company insures against all risks for 110% of invoice value, the premium rate is 1.5%, the profit is 10% based on purchase price. Rate of foreign exchange: USD1.00=RMB6.50 what are FOB price, CFR price and CIF price respectively?
Suppose that Retrojo Inc. is a U.S. based MNC that will need to purchase F$1.10 million (Fijian dollars, F$) worth of imports from Fiji in 90 days. Currently, the spot rate for the Fijian dollar is $0.53 per F$. If Retrojo were to exchange U.S. dollars for the required F$1,100,000.00 Fijian dollars, it would need $ (U.S. dollars). If Retrojo waits 90 days to make this exchange (perhaps due to insufficient funds on hand), and the Fijian dollar appreciates to $0.64 during those 90- days, then Retrojo would need $ (U.S. dollars). Thus, if Retrojo believes that the Fijian dollar will appreciate, it can its exposure to such exchange rate risk by locking in the original exchange rate through the use of a forward contract.
4. Portland Ltd, an Australian firm, needs AUD10 million to finance a new project in USA. The company has the capacity to borrow either from an Australian bank which offers 7% (AUD loan) annual interest rate or from a USA bank which offers 6% (USD loan) annual interest rate. The loan expects to settle after one year period. You found following additional information: The current spot is USD1.0654/AUD One year forward rate is USD1.0455/AUD. Required: Recommend the loan which provides better off to the company.
2) A Canadian company sold 1000 computers for the price of $1000 CND to an Indian company when exchange rate was 1 CND= 65 R. invoice is due after 90 days and when Indian company is about to pay the invoice, exchange rate s 1 CND= 75 R. How much is the loss for Indian company? What are the methods to avoid this risk?
Please Answer the the following image questions....
Quantitative Problem: In the spot market, 4.04 Brazilian reals can be exchanged for 1 U.S. dollar. An Apple iPad Air costs $500 in the United States. If purchasing power parity (PPP) holds, what should be the price of the same iPad Air in Brazil? Do not round intermediate calculations. Round your answer to the nearest whole number. ___ reals
Without Using Excel: ABC Company wants to possibly expand its plant in Europe. The current spot exchange rate is for Euro is €0.83. The initial investment is €2.1, with projected cash flows for three years at €950,000. The discount rate is 10%. The risk-free rate in the US is 5 percent and the risk-free rate in Europe is 7 percent. Calculate the NPV of the project into US Dollars, rounding to the nearest cent, format as "XXX,XXX.XX"
An Omani firm has to make payment of 3 million INR to Indian Company after 30 days. Since the company exposing the risk of currency fluctuation so purchased the forward contract at OMR0.006279 = 1 INR. the spot rate after 30 days was OMR 0.006542/INR Which of the following will be the profit or loss to the firm, if they execute the forward contract? a. Loss of OMR 789 b. All the options are wrong c. Profit of OMR789 d. Profit of OMR 526 e. Loss of OMR 526
Bing Ltd a UK based company is due to pay 80 million Lira to Google Ltd. The spot rate is Lira 2,400/£. Interest rates for the next year are expected to be 8% in the UK and 20% in Italy. Required: Assume the International Fisher Effect is valid, evaluate the effect on the sterling cost of this transaction if Bing Ltd delay payments by one year.
Suppose your company imports computer motherboards from Singapore. The exchange rate is $1.4073 per Singapore dollar. You have just placed an order for 35,062 motherboards at a cost to you of S158 Singapore dollars each. You will pay for the shipment when it arrives in 90 days. You can sell the motherboards for $113 each. Calculate your profit if the exchange rates goes down by 14.51% over the next 90 days.
Union Corp must make a single payment of €5 million in six months at the maturity of a payable to a French firm. The finance manager expects the spot price of the € to remain stable at the current rate of $1.60/€. But as a precaution, the manager is concerned that the rate could rise as high as $1.70/€ or fall as low as $1.50/€. Because of this uncertainty, the manager recommends that Union Corp hedge the payment using either options or futures. Six months Call and Put options with an exercise price of $1.60/€ are available. The Call sells for $.08/€ and the Put sells for $.04/€. A six month futures contract on € is trading at $1.60/€. Should the manager be worried about the dollar depreciating or appreciating? If Union Corp decides to hedge using options, should it buy Calls or Puts to hedge the payment? Why? If futures are used to hedge, should the company buy or sell € futures? Why? What will be the net payment on the payable if an option contact was used? assume…
The selling price of imported olive oil is $20 per case. Your cost is 15 Euros per case, and the exchange rate is currently 1.25, so it takes 1.25 Euros to buy $1. Your argest customer has ordered 15,000 cases of olive oil. How much is the pretax profit for this transaction? a. $120,000 b. $100,000 c. $90,000 d. $80,000 e. $60,000

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