Suppose that Cleveland Co. engages in international business, with transactions denominated in four different foreign currencies: the euro, theCanadian dollar, the Australian dollar, and the Mexican peso. The company wishes to measure its cash flows in a single currency, the dollar, over thenext quarter.The following table shows the total cash inflows and outflows for each currency, along with the expected exchange rate for that currency.For each row in the table, enter the net inflow or outflow in that currency for the MNC. Then, enter the dollar value of that inflow or outflow in the lastcolumn of the table.TotalInflow(Millions)20 eurosNote: Remember to enter a negative sign if a value is negative.CurrencyEuroNet Inflow orOutflow(Millions)TotalOutflowExpected Exchange(Millions)RateNet Inflow or Outflow, InDollars(Millions)15 euroseuros$1.40$Canadian Dollar$C20$C10C$$0.70Australian Dollar$A20$A40A$$0.75Mexican peso10 pesos20 pesospeso$0.20+AA

We need to calculate the net inflow or outflow for each currency and then convert these amounts into…

Answered: Suppose that Cleveland Co. engages in…

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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The treasurer of a major U.S. firm has $38 million to invest for three months. The interest rate in the United States is .55 percent per month. The interest rate in Great Britain is .59 percent per month. The spot exchange rate is £.76, and the three-month forward rate is £77. Ignore transaction costs. a. If the treasurer invested the company's funds in the U.S., how much would the investment be worth after three months? Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89. b. If the treasurer invested the company's funds in Great Britain, how much would the investment be worth after three months in U.S. dollars? Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89. a. U.S. investment b. Great Britain investment
A bank in London, Ontario charges 2.50% commission to buy and sell currencies. Assume that the current exchange rate is US$1 = C$1.3599. a. How many Canadian dollars will you receive from the bank if you sell US$1,340? Round to the nearest cent b. How much commission will you pay the bank for this transaction? Round to the nearest cent
Suppose the quotes for currencies in the three money centers are given as follows: At London center: 1GBP = 150 JPY At Tokyo center: 1USD = 115 JPY At New York center: 1USD = 0.86GBP An investor has 100,000 USD. Is there any opportunity for arbitrage? If yes, explain how does the investor use arbitrage to take advantage of these data? And how much could he or she earn from this?
Vogl Co. is a U.S. firm conducting a financial plan for the next year. It has no foreign, subsidiaries, but more than half of it sale are form exports. Its foreign cash inflows to be received from exporting and cash outflow to be paid for imported supplies over the next year are shown n the following table: Currency total inflow total outflow Canadian dollar (C$) C $32,000,000 C $ 2,000,000 New Zealand dollar (NZ$) NZ $ 5,000,000 NZ $1,000,000 Mexican peso (MXP) MXP 11,000,000 MXP 10,000,000 Singapore dollar (s$) S$ 4, 000,000 8000,000 The spot rate and one-year forward rates as of today are shown below: Currency spot rate one-year forward rate C$ $.90 .93 NZ$ .60 .59 MXP .18 .15 S$ .65 .64 Questions 1. Based on the information provided, determine Vogl’s net exposure to each foreign currency in dollars. 2. Assume that today’s spot rate is used as a forecast of the future spot rate one year from now. The New Zealand dollar, Mexican peso, and Singapore dollars are expected to move in…
Suppose that a commercial bank's current quote for transactions involving the United States dollar is A$1.3214 A$1.3298. (a) State the ask and bid prices for the bank. (b) Calculate the bid/ask spread for the bank.
Iberico plc, a Spanish firm whose functional currency is EUR, sold goods to a British customer for 10,000 GBP on credit. The exchange rate on the date of sale was 1 GBP = 1.2 EUR. Which the journal entry shall Iberico plc prepare regarding the sale? a. DR Cash 12,000 EUR, CR Sale 12,000 EUR b. DR Receivable 10,000 GBP, CR Sale 10,000 GBP c. DR Cash 10,000 GBP, CR Sale 10,000 GBP d. DR Receivable 12,000 EUR, CR Sale 12,000 EUR
Cassowary Corporation’s balance sheet at December 31, 2016 included a $20,400 account receivable from Quail Corporation of Australia. The account receivable is denominated as 30,000 Australian dollars (A$). Assuming no entries have been made since 12/31/2016, what single entry should Cassowary make on January 16, 2017 when the account receivable is collected and the exchange rate for A$ is $.67? Select one: a. Cash (fc) 20,100 Accounts Receivable (fc) 20,100 b. Cash (fc) 20,100 Exchange Loss 300 Accounts Receivable (fc) 20,400 c. Cash (fc) 20,400 Accounts Receivable (fc) 20,400 d. Cash (fc) 20,700 Accounts Receivable (fc) 20,400 Exchange Gain 300
4) Brief, Inc., had a receivable from a foreign customer that is payable in the customer’s local currency. On December 31, 2020, Brief correctly included this receivable for 200,000 local currency units (LCU) in its balance sheet at $110,000. When Brief collected the receivable on February 15, 2021, the U.S. dollar equivalent was $120,000. In Brief’s 2021 consolidated income statement, how much should it report as a foreign exchange gain? a) $–0– b)$10,000 c) $15,000 d) $25,000
Suppose that Cleveland Co. engages in international business, with transactions denominated in four different foreign currencies: the euro, the Canadian dollar, the Australian dollar, and the Mexican peso. The company wishes to measure its cash flows in a single currency, the dollar, over the next quarter. The following table shows the total cash inflows and outflows for each currency, along with the expected exchange rate for that currency. For each row in the table, enter the net inflow or outflow in that currency for the MNC. Then, enter the dollar value of that inflow or outflow in the last column of the table. Total Inflow (Millions) 30 euros Note: Remember to enter a negative sign if a value is negative. Currency Euro Net Inflow or Outflow (Millions) Total Outflow Expected Exchange (Millions) Rate Net Inflow or Outflow, In Dollars (Millions) 15 euros euros $1.20 Canadian Dollar $C30 $C20 C$ $0.90 +A Australian Dollar $A10 $A20 A$ $0.50 Mexican peso 20 pesos 30 pesos peso $0.10 +A…
Suppose that you are the Chief Financial Officer of a corporation based in Germany (EUR is thehome currency), having operations globally in all the continents.In the performance of your estimations and calculations you have to analyze the exposures in theforeign currencies. In the appendix there is a table with downloaded information from theEuropean Central Bank (ECB)’s website, the exchange rates of each day of September 2020.Required:i. Present that information in a table for 5 currencies (freely decide whichcurrencies).ii. Discuss the fluctuations and how the exchange rates have changed from the firstto the last day of the period under investigation.iii. Discuss how the following activities of your company are expected to beinfluenced by the expected EUR appreciation for the last quarter of 2020.Explain your answers.i. Domestic sales;ii. Foreign sales denominated in domestic currency;iii. Foreign sales denominated in foreign currency;iv. Importing goods for domestic sales…
A company from China has cash of CNY 15,000; Outstanding expense CNY 7,000. Total amount of CNY 5,000 is shown as accounts payable. The current spot rate is CNY 16.81/OMR; CNY 6.47/USD (Direct). On the basis of this information, answer the following questions. of a) Determine the net exposed assets in terms of CNY: CNY 10,000 b) Determine the net exposed assets in terms of OMR: c) Determine net exposed assets in terms of USD: P T4

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