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 $0.53 per F$.Suppose that Retrojo negotiates a forward contract with a bank, which commits it to purchasing Fijian dollars at F$1,100,000.00 at $0.53 per Fijiandollar in 90 days. Thus, Retrojo knows with certainty that it will need F$1,100,000.00 × $0.53 per Fijian dollars = $583,000.00 for this exchange.Assume the Fijian dollar depreciates over this time period to $0.42 per Fijian dollar. If this were the case the, outside of the contract with the bank,only $(U.S. dollars) would be needed to exchange for the required F$1,100,000.00.

USD needed at depreciated rate= $462,000.00Explanation:Retrojo Inc. would need $462,000.00 (US…

Answered: Suppose that Retrojo Inc. is a U.S.…

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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You are an international shrimp trader. A food producer in the Czech Republic offers to pay you a 2.4 million Czech koruna today in exchange for a year's supply of frozen shrimp. Your Thai supplier will provide you with the same supply for 3.2 million Thai baht today. If the current competitive market exchange rates are 25.63 koruna per dollar and 41.18 baht per dollar, what is the value of this exchange to you? The cost of the shrimp from the Thai supplier in dollars is $_____. (Round to the nearest cent.)
An American firm has just sold merchandise to a British customer for £100,000, with payment in British pounds 3 months from now. The US company has purchased from its bank a 3-month put option on £100,000 at a strike price of $1.6660 per pound and a premium cost of $0.01 per pound. On the day the option matures, the spot exchange rate is $1.7100 per pound. Should the US company exercise the option at that time or sell British pounds in the spot market?
Spindler, Incorporated (a U.S.-based company), imports surfboards from a supplier in Brazil and sells them in the United States. Purchases are denominated in terms of the Brazilian real (BRL). During 2023, Spindler acquires 280 surfboards at a price of BRL 1,600 per surfboard, for a total of BRL 448,000. Spindler will pay for the surfboards when it sells them. Relevant exchange rates are as follows: Date September 1, 2023 December 1, 2023 December 31, 2023 March 1, 2024 U.S. Dollar per Brazilian Real (BRL) $ 0.210 0.200 0.220 0.205 Required: a. Assume that Spindler acquired the surfboards on September 1, 2023, and made payment on December 1, 2023. What is the effect of the exchange rate fluctuations on reported income in 2023? b. Assume that Spindler acquired the surfboards on December 1, 2023, and made payment on March 1, 2024. What is the effect of the exchange rate fluctuations on reported income in 2023 and 2024? c. Assume that Spindler acquired the surfboards on September 1, 2023,…
Suppose that Retrojo Inc. is a U.S. based MNC that will need to purchase F$2.00 million (Fijian dollars, F$) worth of imports from Fiji in 90 days. Currently, the spot rate for the Fijian dollar is $0.80 per F$. Suppose that Retrojo negotiates a forward contract with a bank, which commits it to purchasing Fijian dollars at F $2,000,000.00 at $0.80 per Fijian dollar in 90 days. Thus, Retrojo knows with certainty that it will need F$2,000,000.00×$0.80 per Fijian dollars =$1,600,000.00 for this exchange. Assume the Fijian dollar depreciates over this time period to $0.67 per Fijian dollar. If this were the case the outside of the contract only (U.S. dollars) would be needed to exchange for the required F$2,000,000.00.
You are an international shrimp trader. A food producer in the Czech Republic offers to pay you 2.4 million Czech koruna today in exchange for a year's supply of frozen shrimp. Your Thai supplier will provide you with the same supply for 2.9 million Thai baht today. If the current competitive market exchange rates are 25.04 koruna per dollar and 40.64 baht per dollar, what is the value of this exchange to you? The cost of the shrimp from the Thai supplier in dollars is $ (Round to the nearest cent.)
JJ Fashion Wholesalers Ltd, an Indian clothing manufacturer, has a contract to purchase cotton from an Australian supplier to the value of AUD $700,000. How much will this order cost in Indian rupees (INR) if the bank has quoted JJ Fashion an AUD/INR exchange rate of 54.07 – 54.98?
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.
Suppose that the U.S. firm Halliburton buys construction equipment from the Japanese firm Komatsu at a price of ¥300 million. The equipment is to be delivered to the United States and paid for in one year. The current exchange rate is ¥100 = $1. The current interest rate on one-year U.S. Treasury bills is 6%, and on one-year Japanese government bonds the interest rate is 4%. a. If Halliburton exchanges dollars for yen today and invests the yen in Japan for one year, it will need $ to exchange today in order to have ¥300 million in one year. (Round your response to the nearest dollar)
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 $1.36/€1.00 and the expected inflation rate is 4% in the U.S. and 2% in Italy. The normal borrowing rate is 7 percent in dollars and 6 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? (Please keep 2 digits in decimals to get the right answer) $117,160 None of the above with the $10,000 of the correct answer $51,360 $1,165,209 $1,310,116
Lost Pigeon Aviation, a U.S. company, produces and exports industrial machinery overseas. It recently made a sale to a Japanese manufacturing firm for ¥694 million, but the Japanese firm has 60 days before it must make the payment to Lost Pigeon Aviation The spot exchange rate is ¥132.78 per dollar, and the 60-day forward rate is ¥134.72 per dollar. Is the yen selling at a premium or at a discount in the forward market relative to the U.S. dollar? The yen is trading at a discount in the forward market. In the forward market, the yen is trading at a premium.
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 DKK14,600,000 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. Present value of the benefit of the concessionary loan
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.

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