Fundamentals of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Fundamentals of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
9th Edition
ISBN: 9781259722615
Author: Richard A Brealey, Stewart C Myers, Alan J. Marcus Professor
Publisher: McGraw-Hill Education
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Chapter 22, Problem 1QP

a.

Summary Introduction

To discuss: The number of euros Person X can purchase for $100, and how many dollars can be bought from 100 euros.

a.

Expert Solution
Check Mark

Explanation of Solution

Purchase of euros for $100:

1001.376=72.67

Thus, €72.67 can be purchased for $100.

Purchase of dollars for €100:

100×1.376=$137.60

Thus, $137.60 can be purchased for €100.

b.

Summary Introduction

To discuss: The number of country S franc’s Person X can purchase for $100, and how many dollars can be bought from 100 country S francs.

b.

Expert Solution
Check Mark

Explanation of Solution

Purchase of country S francs for $100:

100×0.888=88.80

Thus, 88.80 country S francs can be purchased for $100.

Purchase of dollars for 100 country S francs:

1000.888=$112.61

Thus, $112.61 can be purchased for 100 country S francs.

c.

Summary Introduction

To discuss: The increase or decrease in the exchange rate of B pounds

c.

Expert Solution
Check Mark

Explanation of Solution

If there is a depreciation in the B pounds then $1 will purchase more B pounds so the direct exchange rate is ($/£) will decline, and the indirect exchange rate (£/$) will rise.

d.

Summary Introduction

To discuss: The choice of person X on the dollars of country U or country C.

d.

Expert Solution
Check Mark

Explanation of Solution

One dollar of country U can purchase 1.095 country C dollars. Thus, one dollar of country U worth’s more than one dollar of country C.

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Students have asked these similar questions
Suppose that you are a U.S.-based importer of goods from the United Kingdom. You expect the value of the pound to increase against the U.S. dollar over the next 30 days. You will be making payment on a shipment of imported goods in 30 days and want to hedge your currency exposure. The U.S. risk-free rate is 5.5 percent, and the U.K. risk-free rate is 4.5 percent. These rates are expected to remain unchanged over the next month. The current spot rate is $1.90.  1.Move forward 10 days. The spot rate is $1.93. Interest rates are unchanged. Calculate the value of your forward position. Do not round intermediate calculations. Round your answer to 4 decimal places.
Don't solve. I mistakenly submitted blurr image please comment i will write values. please dont Solve with incorrect values otherwise unhelpful.
The  image is blurr please comment i will write values. please dont Solve with incorrect values otherwise unhelpful.
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