U.S. deposit rate for 1 year = 11.5% U.S. borrowing rate for 1 year = 12% Swiss deposit rate for 1 year =   9% Swiss borrowing rate for 1 year = 10% Swiss forward rate for 1 year = $.40 Swiss franc spot rate = $.39   Also assume that a U.S. exporter denominates its Swiss exports in Swiss francs and expects to receive SF700, 000 in 1 year. Suppose you have money market and forward hedge opportunities available.   a.  If you hedge using money market, what will be the approximate value of your exports in 1 year in U.S dollars? b.  What will be the approximate value of your exports in 1 year in U.S dollars if you use forward hedge?   c. Which method do you use? Why?

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: The exchange rate is 113 Swiss francs per dollar. How many U.S. dollars are needed to purchase 2,500…

A: In the given case, we have provided the exchange rate of per dollar into swiss francs.And, we have…

Q: Suppose a German importer owes an Australian exporting company 150,000 AUD, due in three months.…

A: Importer is the person who purchase the goods from foreign country. When the goods are purchased by…

Q: A MNC faces the following effective, after-tax dollar borrowing and lending rates in the US and UK.…

A: The concept is that by making payments to the US affiliate earlier, the MNC can take advantage of a…

Q: James Clark is a foreign exchange trader with Citibank. He notices the following quotes: Spot…

A: Spot exchange rate = USD1.2051/CHFSix-month forward exchange rate = USD1.1922/CHFSix-month $…

Q: Let the U.S. dollar-yen spot rate be ¥120/$. Also, let the 180-day forward exchange rate be…

A: Calculation- Forward discount = [[forward exchange rate - spot exchange rate)/ spot exchange…

Q: If one Swiss franc can purchase 0.85 U.S. dollar, how many Swiss francs can one U.S. dollar buy?

A: Exchange rate is the amount of 1 currency has to be paid to get another currency.

Q: Suppose that Retrojo Inc. is a U.S. based MNC that will need to purchase F$1.10 million (Fijian…

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

Q: Lee Junho who is a currency trader in Japan observers the following market conditions: • Annual…

A: Covered interest arbitrage is an arbitrage strategy where an investor hedges against exchange rate…

Q: er annum in the U.S. and 5.7% per annum in the U.K. Assume that you can borrow £1,000,000 or its…

A: In monetary terms, the exchange rate (also known as the foreign exchange rate, forex rate, or rate)…

Q: The one-year interest rate is 1.00% in the U.S. and 3.10% in Canada. The current exchange rate of…

A: Using 1 USA = CAD 1.37

Q: In alternative universe, the Australian government has decided to enter into a target-zone…

A: Given: 180000 Current rate = 1.5 AUD/$ Central rate = 1.55 AUD/$ Fluctuate 11% ether side.

Q: Suppose a German importer owes an Australian exporting company 150,000 AUD, due in three months.…

A: Expected spot rate is the rate at which an investor expects the currency to be traded after a…

Q: The spot rate of foreign exchange between Canada and the United Kingdom is CAD$1.75/£. If the…

A: The question is based on the concept of forward exchange calculation by use of interest rate parity…

Q: Use the following information on the U.S. dollar value of the pound sterling to answer Forward Rate…

A: b.  No effect

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

A:

Q: If the spot exchange rate is yen120/€1 and the one year forward exchange rate is yen130/€1. Then the…

A: The foreign exchange market is a dynamic arena where currencies are traded. Two crucial rates in…

Q: Sun Bank USA has purchased a 24 million one-year Australian dollar loan that pays percent interest…

A: Loan amount$24,000,000Interest rate15%Spot rate(AUD/USD)0.625Interest rate13%Spot…

Q: Your foreign exchange trader in the United States has quoted the following rates for the Swiss…

A: Here, Swiss Frans/USD Spot 1 Month 3 Month 6 Month $0.5965/72 50/61 127/143 242/267

Q: Assume that a bank has assets located in Germany worth €150 million earning an average of 8 percent.…

A: Exchange rate:An exchange rate represents the rate at which one currency may be exchanged for…

Q: it on simple interest to the European Union (EU). The prevailing interest rates gazetted from UK…

A: A money market is a strategy for locking in the price of a different currency in the native currency…

Q: A product sells for $1,000 in the U.S. If the exchange rate between $ and euro is $1 = 0.90 euro,…

A: Given data; Price of product in US = $1,000 Exchange rate between dollar and Euro = $1 = 0.90 euros

Q: e one-year forward rate for the Swiss franc is SF1.1505/$. The spot rate is SF1.1626/$. The interest…

A: Based on the interest rate the spot rate and forward rate must be in equilibruim based on the…

Q: Is there any violation of CIP? (b) Calculate the covered margin (going short on the AUD). (c)…

A: Here the spot rate is lower than the forward rate, so the EUR is selling at a premium.  The interest…

Q: Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 İNZS(%) 6.59 6.76 4.97 6.00 5.94 6.73 7.34…

A: Exchange rate:The exchange rate is a pivotal financial metric representing the relative value of…

Q: Required: Suppose you conduct currency carry trade by borrowing $1 million at the start of each year…

A: Here,Borrowing is $1,000,000Spot ExchangeRate is NZ$1.9114 per $

Q: Tuli Super Minerals of Manicaland exports raw diamonds valued at one million pounds (£1,000,000) on…

A: The money market hedge is used by companies to hedge a transaction with a foreign company. It…

Q: Assume the following information: U.S. deposit rate for 1 year U.S. borrowing rate for 1 year New…

A: Money Market Hedging is one of the technique used for hedging purposes.  It locks in current…

Q: months' time. The U.S. interest rate is 2% p.a., and the Swiss interest rate Assume that the current…

A: Rate of exchange rate between two countries depends on interest rate and move according to interest…

Q: NTERNATIONAL FINANCE Today you learned about following exchange rate quotes: (a) 1 KWD (Kuwaiti…

A: In the international business, there is a need for some other currencies but they can not be bought…

Q: An investor enters today into a one-year-long currency forward on 1000000 units of foreign currency.…

A: A currency forward contract is a financial agreement between two parties to exchange a specific…

Q: Below is the information regarding U.S. and Canadian annualized interest rates: Currency Lending…

A: Borrow Euros = $20,000,000 Spot Rate of Euro = $1.13 U.S. Lending rate = 6.73% Euro Borrowing rate =…

Q: Today, a U.S. dollar can be exchanged for 3 New Zealand dollars or for 1.6 Canadian dollars. The one…

A: Expected return is a crucial financial metric representing the projected gain or loss from an…

Q: If the firm uses money market hedge, one year from now, their accounts receivables will fetch them:…

A: The relative worth of two currencies, or the amount of one currency that may be exchanged for one…

Q: A European firm borrows MXN from a Mexico bank at a 7% interest rate. Over that same time, the Euro…

A: Here's how to calculate the European firm's euro-denominated equivalent cost of borrowing:1.…

Q: Assume the exchange rate is 1.05 Swiss francs per U.S. dollar. How many U.S. dollars are needed to…

A: Given, 1 US Dollar = 1.05 Swiss Frans

Q: STEP: 2 of 2 Suppose that Retrojo Inc. is a U.S. based MNC that will need to purchase F$2.00 million…

A: As per the problem, we are required to compute the number of US dollars required to exchange the 2…

Q: 2000. Fill out columns (4)- (7) and compute the total dollar profits from this carry trade over the…

A: The exchange rate is the amount that can be exchanged from one currency to another. It is essential…

Q: On December 20, 2020, Momeier Company (a U.S.-based company) sold parts to a foreign customer at a…

A: Introduction: An income statement is a financial report that details the company's earnings and…

Q: Currently, the spot exchange rate is $0.80/A$ and the one-year forward exchange rate is $0.76/A$.…

A: Here,Spot Exchange Rate is $0.80 per A$One year Forward Exchange Rate is $0.76 per A$One year…

Q: An U.S. firm requires C$230,000 in 90 days to pay the imports from Canada. To avoid currency…

A: Whenever there is an involvement of foreign currency in the transaction, it results in foreign…

Q: A UK company owes an American company $100,000 due to be paid in three months. The company wishes to…

A: US dollars payable = $100,000.3 month interest rate in US dollars is 2.425% , means if X amount is…

Q: On December 20, 2020, Momeier Company (a U.S.-based company) sold parts to a foreign customer at a…

A: If a person sells goods in other country than foreign exchange rates  impacts on its financials…

Q: Sun Bank USA has purchased a 16 million one-year Australian dollar loan that pays 12 percent…

A: Foreign currency, also known as foreign exchange or forex, refers to the currency of a country other…

Q: In its 2021 income statement, what amount should Mifflin include as a foreign exchange gain or loss…

A: Foreign Exchange : It is defined as the exchange of one currency to another. During the case of…

Q: Using the USD exchange rate, approximately how many Canadian dollars can you buy for 2500 Swiss…

A: Given:1 Swiss Franc (CHF) = 1.35 USD1 USD = 1.21 Canadian Dollar (CAD)Let's calculate step by…

Instruments of Foreign Exchange Market

Foreign exchange is a worldwide market in which one nation’s currency is converted into another nation’s currency. In further terms, exchanging of nations currency with foreign currencies. Foreign exchange happens at a specified rate which is termed the foreign exchange rate. The exchange rates are not constant continuously changing as they are derived by market forces of supply and demand. Widely used foreign currencies are the United States- dollar, Euro, Japanese Yen, British pound, and Australian dollar. US- dollar is the most denominated foreign currency. The Euro to US dollar is a widely used currency pair in the forex market as these two currencies represent the world’s enormous economy. Forex trade is simple as exchanging currencies at the bank. The main players of forex markets are the central banks, financial institutions, intermediaries, investments banks, and other banks. Central Bank is the supreme player who decides the currency value of their own nation on the forex market. Mostly foreign exchange-traded at FX market (forex market) when tourists’ visits a foreign country, import, and export happens between two countries.