Suppose that Nevada Co., a US-based MNC, makes regular, monthly purchases of materials from a German supplier named Spicurity. These regularpayments are typically in the amount of 250,000 euros. Last month the exchange rate was $1.44 per euro. Nevada Co. only has cash reserves indollars, while Spicurity only has cash reserves in euros. Suppose both companies use the same bank.In order to conduct this transaction last month, Nevada Co. required $transaction reduced Nevada's account by this amount, denominated in dollarsand credited it to Spicurity's account.360,000.00 to pay for the materials. Thus, the bank handling theThe bank then converted this amount toM

Nevada has only dollars and Spicurity has euros. Amount to be paid to Spicurity = 250,000 euros…

Answered: Suppose that Nevada Co., a US-based…

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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Vikram
Accounting records of Company C are expressed in EUR. On 30 April 20XX, it sells goods to a foreign company that requests the amount of the sale to be expressed in USD. No VAT to be charged. When the invoice is sent to the client for an amount of USD 1.000, the exchange rate EUR / USD is 1. On 31 May 20XX, the client paid the invoice in USD on the EUR bank account so that the amount in USD is immediately converted into EUR at the current exchange rate. The current exchange rate is 1EUR = 1,10 USD. Prepare the accounting journal entries for the sale and the repayment.
The treasurer of a major U.S. firm has $22 million to invest for three months. The interest rate in the United States is .22 percent per month. The interest rate in Great Britain is .27 percent per month. The spot exchange rate is £.622, and the three-month forward rate is £.624. Ignore transaction costs. What would be the value of the investment in three months if the money is invested in the U.S. or if it is invested in Great Britain? (Do not round intermediate calculations and enter your answers in dollars, not in millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) U.S. Great Britain
Tex Hardware sells many of its products overseas. The following are some selected transactions. Tex sold electronic subassemblies to a firm in Denmark for 160,000 Danish kroner (Dkr) on June 6, when the exchange rate was Dkr 1 = $0.1710. Collection was made on July 3 when the rate was Dkr 1 = $0.1713. On July 22, Tex sold copper fittings to a company in London for £36,000 with payment due on September 20. Also, on July 22, Tex entered into a 60-day forward contract to sell £36,000 at a forward rate of £1 = $1.630. The forward contract is not designated as a hedge. The spot rates follow: July 22 £1 = $1.580 September 20 £1 = $1.612 Tex sold storage devices to a Canadian firm for C$75,000 (Canadian dollars) on October 11, with payment due on November 10. On October 11, Tex entered into a 30-day forward contract to sell Canadian dollars at a forward rate of C$1 = $0.730. The forward contract is not designated as a hedge. The spot rates were as follows: October 11 C$1 =…
On 1 July 2019 Celine Consultants Ltd completes a contract to provide advice on the installation of a networked computer system to a company in the US. The client pays the fee of US$700 000 into Celine Consultants’ US bank account on that date. The bank pays interest of 5 per cent annually on 30 June. The exchange rate information is: 1 July 2019 $A1 = US$0.59 30 June 2020 $A1 = US$0.67 What journal entries are required in Celine Consultants Ltd’s books for 1 July 2019 and 30 June 2020
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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
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None
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