Your Boston-headquartered manufacturing company, Wruck Enterprises, obtained a 50-million-peso loan from a Mexico City bank last month to fund the expansion of your Monterrey, Mexico, plant. The exchange rate was 10 U.S. cents per peso when you took out the loan, but since then the exchange rate has dropped to 9 U.S. cents per peso. Has Wruck Enterprises made a gain or a loss due to the exchange rate change, and how much? Note that your shareholders live in the United States.

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: Boeing just signed a contract to sell a Boeing 737 aircraft to Air France. Air France will be billed…

A: Spot rate = $1.05/€1-year Forward rate = $1.10/€Interest rate in US = 6%Interest rate in France =…

Q: A U.S. firm buys merchandise from a Portuguese company at a cost of EUR 250,000.  The merchandise…

A: The United State firm is exposed to foreign exchange fluctuation because it will pay in dollars in…

Q: Incantieri sold a cruise ship to Disney Cruise Line, a U.S. company, and billed $1 billion payable…

A: Hedging: It is  a risk management strategy  to remove  losses in investments by taking an opposite…

Q: Citigroup recently purchased $10,4 million worth of euro-denominated one-year CDs that pay 10…

A: Foreign exchange refers to the change of one currency into another currency on the basis of demand…

Q: An investor in the United States bought a one-year Brazilian security valued at 250,000 Brazilian…

A: To compute: The return to the investor on her initial investment of $200,000.

Q: change in the Mexican peso is 1% during the next quarter, the maximum one-quarter loss is about 65…

A: There are change in the exchange rate due to which there high fluctuations in value of goods and…

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

A:

Q: Suppose DeGraw Corporation, a U.S. exporter, sold a solar heating station to a Japanese customer at…

A: When the bills are settled in foreign exchange currency, the company always has a risk of conversion…

Q: Suppose, Company ABC is U.S. based company and has a British subsidiary. It is expected that the…

A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…

Q: Inc. is ad ing Mexico. The Mexican subsidiary manufactures toys for kids which will be sold to…

A: If there is a constant growth rate from year 4 onwards, then the terminal value with the constant…

Q: Suppose that Coleman Co., a U.S.-based MNC, is seeking a one-year loan to finance its operations in…

A: US dollar borrowing rate = 10%Canadian dollar borrowing rate = 4%Appreciation of Canadian dollar =…

Q: Boeing just signed a contract to sell a Boeing 737 aircraft to Air France. Air France will be billed…

A: In the field of finance, hedging is a tactic employed to reduce or eliminate the possible adverse…

Q: XYZ Corporation exchanges Japanese yen (JPY) into US dollars. They exchange 50,000,000 JPY into USD.…

A: JPY to be exchanged = 50,000,000 JPYCurrent exchange rate : 1 JPY = 0.0082 USDCurrency exchange fee…

Q: You are the vice-president of finance for Exploratory Resources, headquartered in Calgary. In…

A: The question deals with foreign exchange risk and how it affects the repayment of a loan in a…

Q: In early 2012, the spot exchange rate between Canadian dollar and U.S. dollar was 0.8200 (USD per…

A: Forward contracts are customized contracts made for buying/selling at a future date at an agreed…

Q: SinTell has USD $24 million in excess cash that it has invested in China at an annual interest rate…

A: An exchange rate is the rate at which the currency of home country can be exchanged with the single…

Q: Mr. Jesse Pinkman (A Colombian Businessman) wants to do business in Peru and interested to know the…

A: Exchange rate: It is the price at which one currency is exchanged with another.

Q: What are spot rates and forward rates? Scoot Corp, a Canadian company, produces and exports…

A: Hedging is a technique used to reduce risks. The types of hedging are Forward, Futures, and money…

Q: Nicantieri sold a cruise ship to MCC Cruise Line, a U.S. company, and billed $1 billion payable in…

A: One currency can be exchanged for another currency using the currency exchange rates. To hedge the…

Q: Pfizer, an American corporation, just signed a contract to sell laboratory equipment for COVID -19…

A: concept. In order to avoid risk arising due to change in exchange rates , hedging is done. various…

Q: If Boeing decides to use a money market hedge, what is the USD amount it would receive in 1 year…

A: A money market hedge is a financial strategy used by businesses and investors to protect themselves…

Q: Your Boston-headquartered manufacturing company, Wruck Enterprises, obtained a 55-million-peso loan…

A: Loan Amount = 55000000 peso Exchange rate = 14 US cents/peso Dropped Exchange rate =6 US cents/peso…

Q: Ganado Corporation recently received a payment for one of the consignments it exported to Europe, It…

A: A cross currency rate is the  rate which is used and computed so that a rate can be determined…

Q: Last year, the Mexican peso/U.S. dollar exchange rate was MXN13.3769/$. Today, the exchange rate is…

A: Value = 14,680,000S1 = 13.3769S2=16.4196

Q: Suppose one year ago, Hein Company loan payables outstanding in British pound valued at 440,000…

A: Loss=Current value - Value of One year ago.

Q: Maloney Corporation has decided to speculate on the foreign exchange market, and has entered into a…

A: Introduction:- This question involves the preparation of journal entries to record a forward…

Q: You are the vice-president of finance for Exploratory Resources, headquartered in Calgary. In…

A: The loan amount in US$ while the exchange rate is for per unit of C$. then,The total amount of loan…

Q: IBM purchased computer chips from NEC, a Japanese electronics concern, and was billed ¥210 million…

A: Exchange rate are volatile in nature and change quickly in the market depending upon the supply and…

Q: Blowfast Corporation, a U.S. exporter, sold wind turbines to a Mexican customer at a price of…

A: Foreign Exchange loss/gain: Foreign Exchange loss /gain  is the result due to currency…

Q: 1 CND= 75 R. How much is the loss for Indian company? What are the methods to avoid this risk?

A: The risk of fluctuating exchange rates across currencies that could have an impact on a company's…

Q: Lost Pigeon Aviation, a U.S. company, produces and exports industrial machinery overseas. It…

A: Given, Sale to Japanese firm = ¥694 million. Spot exchange rate = ¥132.78 per dollar  Forward rate =…

Q: Boeing just signed a contract to sell a Boeing 737 aircraft to Air France. Air France will be billed…

A: Hedging: This is a risk management strategy employed to reduce or eliminate the possible adverse…

Q: Chapman, Inc.'s Mexican subsidiary, V. Gomez Corporation, is expected to pay to Chapman 50 pesos in…

A: Given information: Dividends amounted to 50 pesos Exchange rate in 1 year is $0.12 per peso Dividend…

Q: Boeing just signed a contract to sell a Boeing 737 aircraft to Air France. Air France will be billed…

A: Amount receivable = €19 millioncurrent EUR/USD rate = 1.0651   One-year forward rate = 1.0898Annual…

Q: oday, a Van Gogh painting is worth $120 million or about 85 million British pound. Since 1990, the…

A: The exchange rate refers to the number of home currency units a dealer is ready to accept or pay for…

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.