Suppose your company imports computer motherboards from Singapore. The exchange rate is $1.4651 per Singapore dollar. You have just placed an order for 44,910 motherboards at a cost to you of S155 Singapore dollars each. You will pay for the shipment when it arrives in 90 days. You can sell the motherboards for $111 each. Calculate your profit if the exchange rates goes up by 8.72% over the next 90 days.

Q: FDI Ltd is a UK-based firm that earns revenue from financial investments in the US. It has invested…

A: A forward contract is a type of derivative that is used for hedging. In a forward contract two…

Q: An investor has $10m to invest and has the following options: 1) depositing it in a US bank account…

A: Exchange rate: It is the value of a currency that is exchanged with another currency.

Q: Imagine that you are importing pasta from Italy and reselling it in the United States. Your largest…

A: Forward rate agreement helps the buyer of a currency to buy the required currency at a future rate…

Q: You are the managing Director of Sunkwa limited a food processing company based in Atlanta in the…

A: The question is based on the concept of Foreign exchange.

Q: are the treasurer for ABC corporation.  You just received a bill from your Italian supplier of Genoa…

A: Exchange rates are very important in the international business it has large impact on the…

Q: A U.S. company can borrow 10,000 pounds in Great Britain for 6% interest, paying back 10,600 pounds…

A: Here, Borrowing Amount is 10,000 pounds Amount paid back in year is 10,600 pounds Interest Rate of…

Q: Haines Co. expects to receive 5 million euros tomorrow as a result of selling goods to Belgium.…

A: Value-at -risk is an important factor about which every investor is concerned. Value- at-risk means…

Q: Your company is looking at a new project in Mexico. The project will cost 9 million pesos. The cash…

A: To determine whether your company should make the investment in Mexico, we need to calculate the net…

Q: Jaguar has full manufacturing costs of their S-type sedan of £22,803. They sell the S-type in the UK…

A: The percentage margin is based on cost of manufacturing and its selling price in Pound sterling.…

Q: Advice the Ghanaian multinational which one is cheaper.

A: Loan amount in pounds sterling 10,00,000 1000000 Bank Interest rate 8% 22% Exchange rate…

Q: In Munich, a hotdog costs €9 and in Boston a hot dog costs $1. If the exchange rate is $1.35/Euro.…

A: Cost per Munich hotdog = €9 Cost per US hotdog = $1 Exchange rate €1 = $1.35

Q: tractor has a cost of $ 1m for a given specification. If the current $: £ rate is 1.3500:1, i) What…

A: Exchange rate (ER) is a value at which two different currencies are exchanged or traded. To make…

Q: Let’s suppose that one US Dollar (USD) is currently selling for ten Mexican Pesos (MXN) on the…

A: Arbitrage is a financial technique that is used by traders in the financial markets to gain from the…

Q: In a recent e-news, you observe that the 6-month forward rate is $1.5031 / Euro. Further, if you…

A: To determine if arbitrage profit is possible, we need to analyze the interest rate parity and…

Q: Land Rover has full manufacturing costs of their Evoque crossover of £32,500. They sell the Evoque…

A: Price of car in British pounds= Manufacturing costs*(1+profit margin)= GBP32,500*(1+15%)=…

Q: Suppose a U.S. firm buys $200,000 worth of stereo speaker wire from a Mexican manufacturer for…

A: The saving in dollar to eliminate foreign exchange currency risk is difference between payment made…

Q: Currently, the USD/MXN rate is 19.7800 and the six-month forward exchange rate is 20.1700. The…

A:

Q: You are the managing Director of Sunkwa limited a food processing company based in Atlanta in the…

A: Call Option is a derivative contract generally of 100 underlying stocks that enables holders to…

Q: Suppose that a firm is considering opening a plant on the moon, and the current exchange rate is…

A: Labor productivity means the actual units produced when compared to the expected units. Labor…

Q: A US based IT firm required GBP 100000 in 180 days. The company feels that exchange rates are…

A: 1. Forward contract =                                                                          =…

Q: Today, one unit of Mexican Peso can purchase 2.60 units of Thailand Baht and it is forecasted that…

A: 1 mexican peso = 2.60 Thai baht   Now the depreciation in baht will be = 5%

Q: In the foreign exchange spot market, one Indian Rupee can buy 2.80 Malaysian Ringgit. The Malaysian…

A: Solution:- Foreign exchange rate means the price of one currency in terms of another currency.

Q: dollars today a contract allows you to buy 1000 British Pound at 1500 ve the option to sell British…

A: Contract - A legal binding agreement between two or more parties that establishes, outlines, and…

Q: Suppose that you are the treasurer of IBM with an extra US$1,000,000 to invest for six months. You…

A: Cash reserve = $1,000,000Interest rate in US = 1.81% (Semi-annual)Interest rate in Japan = 13%Spot…

Q: While you were visiting London, you purchased a Jaguar for £35,000, payable in three months. You…

A: Information provided: Amount to be paid in 3 months = 35000 pounds Interest rate in US = 0.22% per…

Q: A Canadian company has a division in Mexico. The Canadian company needs to borrow money for its…

A: A corporation borrows funds from the market from where the funds can be availed at the least…

Q: Required: a. Calculate your expected dollar cost of buying SF9,000 if you choose to hedge by a call…

A: Forward contracts, futures contracts, and hedging are all concepts related to financial risk…

Q: You are an international shrimp trader. A food producer in the Czech Republic offers to pay you 2.1…

A: In doing business at international level one needs to convert into other currencies to make payments…

Q: rate that would make your firm indifferent between the two alternatives. -0%

A: Calculate the proceeds from the forward contract:Receive £700,000 in 180 daysForward rate:…

Q: A Brazillian coffee exporter has found a market for his coffee to the tune of 1,800,000 Euros. At…

A: Interest rate parity With spot rate (S=in currency ksh per euro), interest rate in Kenya (ik),…

Q: A US consulting firm sent an invoice of £200,000 to a UK client firm.The spot rate of pound when the…

A: Forward rate is that term of rate of exchange which is used in foreign exchange market. It is that…

Q: Cook Manufacturing (US): (Account Payable: Pay 10,000,000 Yen, 90 days from now)   Spot rate : 100…

A: This is a concept of money market hedging. In this, we have to create an asset at present for…

Q: Assume that relative Purchasing Power Parity holds. Also assume that the inflation rate over the…

A: Exchange rate refers to the rate which is used for converting one currency into another currency for…

Q: Transaction exposure. International Products has contracted for 7,000 winter hats from Russia, The…

A: The question is based on the concept of exchange rate and the value of the exchange rate changes…

Q: Dell is selling 20,000 units in Europe at an average price of €1,700 per unit. Both the spot and…

A: > Given:> European average price = 1700> Dell selling = 20,000 units>Exchange rate =…

Q: In the foreign exchange spot market, one Indian Rupee can buy 2.80 Malaysian Ringgit. The Malaysian…

A:

Q: Today, one unit of Mexican Peso can purchase 2.60 units of Thailand Baht and it is forecasted that…

A: 1 Mexican Peso = 2.60 Thailand Baht Thailand Baht will depreciate by 5%

Q: Last year, your company sold electronic products to Brazil. You are expecting to receive Real…

A: Hedging is a technique in general used by commodity buyers/sellers to mitigate their risk in the…

Q: Toyota sells Camrys in the U.S. for $23,000 when the exchange rate is 80 JPY/USD. If the exchange…

A: In this question, we are required to determine the price Toyota has to charge to receive the same…

Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.