Financial questions 37131 | Business & Finance homework help


Question

1. Oregon Transportation Inc. (OTI) has sound authorized a curtail to escheatment inconsiderable reprove cars from a creator in Germany €2,500,000. The escheatment was made in June delay liquidation due six months succeeding in December. Owing this is a sizable curtail for the solid and owing the curtail is in Euros rather than dollars, OTI is regarding sundry hedging alternatives to classify the diversify trounce surrender arising from the sale. To aid the solid mould a hedging attachedness you bear collected the subjoined notification:

The defacement diversify trounce is $.8924/€

The six month presumptuous trounce is $.8750/€

OTI’s absorb of excellent is 11%

The Euro zone 6-month excellent traffic trounces are 7%-9% pa

The U.S. 6-month excellent traffic trounces are 6%- 8% pa

The guerdon (discretion worth) for December ole discretions delay lower worth $.90 is 1.5%

OTI’s meet for 6-month defacement trounces is $.91/€

The budget trounce, or the main sportive escheatment worth for this plan, is $2,300,000 or $.92/€

 

Assume that analysts attend the subjoined sunencumbered diversify trounce scenarios each delay an resembling verisimilitude of occurance (i.e. 33.3%)

Strong Dollar: $0.8600

Neutral :$0.8750

Weak Dollar :$0.9500

Assume that Oregon clarified to use presumptuous hedge. What allure be the expected absorb of the reprove cars? (Hint: Use statistical trust to apportion the expected absorb)

A. $2,150,000

B. 2,160,527

C. 2,241,778

D. $2,187,500

E. $2,350,000

 

2. Solid "J" is a U.S.-grounded MNC delay net specie inflows of German marks and net specie inflows of Sunland francs. These two currencies are extremely negatively correlated in their movements athwart the dollar. Solid "K" is a U.S.-grounded MNC that has the corresponding inhospitableness as Solid "J" in these currencies, exclude that its Sunland francs delineate specie outflows. Which solid has a loftier inhospitableness to diversify trounce surrender? a. Solid "J". b. Solid "K". c. Firms "J" and "K" bear encircling the corresponding roll of inhospitableness. d. Neither solid has any inhospitableness.

A. Solid "J".

B. Solid "K".

C. J and K bear corresponding roll of inhospitableness

D. Neither solid has any inhospitableness

 

3. Annual inflation trounces in the US and Turkey were 2% and 20% and 3% and 10% in 2003 and 2004 respectively. The defacement trounce for the New Turkish Lira (TRY) was is 1.55 per dollar in January 2003.

Calculate the expected PPP involved USD/TRY diversify trounce as of end of 2004.

A. USD/TRY1.8555

B. USD/TRY1.9475

C. USD/TRY1.7878

D. USD/TRY 2.1010

E. USD/TRY2.30

 

4. The subjoined defacement and curiosity-behalf trounces to vindication the subjoined inquiry:

USD/EURO 1.2310-1.2340

R-USD-3-months: 3.00%-3.25% pa

R-EUR-3-months: 4.00%-4.50% pa

Assume that you are a banker and you bought Eur100m presumptuous grounded on the presumptuous worth apportiond from trounces beneficial aloft. However, succeeding you entered into the curtail , you did not employ in the regulate of performances that you supposed to (in regulate to constitute a surrender open lie). In other suffrage, you bear a net inhospitableness of EUR100m. Suddenly three months succeeding Fed dramatically increased curiosity-behalf trounces, which pushed the allusion trounces up by 2% in US. In retort to curiosity-behalf trounce hike, USD/EUR trounce besides moved down to: USD/EUR1.2050-1.2090. Concerned encircling prefer movements in the curiosity-behalf and diversify trounces, you completed the loop by borrowing in Euros, converting them into USD and depositing dollars into an curiosity-behalf earning assertion (all delay 9 months manliness). What would be your net missing or create Delay these sarcastic movements in curiosity-behalf trounces, how plenteous excellent would your bank induce or create owing of the presumptuous curtail you adduced grounded on the loving trounce?

A. Create 2,700,000

B. Loss, 2,700,000

C. Create 3,452,366

D. Loss, 3,451,366

E. None of the aloft

 

5. P&G is a US grounded MNC and has operations in Germany. P&G expects 120,000,000 DEM specie courses in 6 months, besides due to weighty tenuity, specie courses are expected to veer as plenteous as 20%. In other suffrage P&G can get DEM120m, DEM96m or DM144m depending on the economic stipulations. Grounded on their trusts, P&G treasurers elect to vend DEM96m presumptuous at DEM1.90and buy DEM48m put discretion at DEM1.90 twain delay six month maturities. The absorb of the put discretion is $0.02. Assume that the defacement diversify trounce turns out to be DEM2.10/USD at the deadness and specie courses materialize as DEM144,000,000. What allure the net USD specie-flows of P&G and what allure be the absorb of acquiring one US dollar?

A. 50,526,316 and DEM1.9000/USD

B. 25,263,158 and EM1.9200/USD

C. 74,829,474 and 1.924

D. none of the aloft

 

6. Sony of Japan produces DVD players and exports them to the United States. Last year the diversify trounce was 135/$ and Sony abounding $145 per DVD player. Currently the defacement diversify trounce is 105/$ and Sony is charging $175 per DVD player. What is the mark of ignoring through by Sony of Japan on their DVD players?

A. 86.7%

B. 72.4%

C. 73.2%

D. 27.58%

 

7. Oregon Transportation Inc. (OTI) has sound authorized a curtail to escheatment inconsiderable reprove cars from a creator in Germany €2,500,000. The escheatment was made in June delay liquidation due six months succeeding in December. Owing this is a sizable curtail for the solid and owing the curtail is in Euros rather than dollars, OTI is regarding sundry hedging alternatives to classify the diversify trounce surrender arising from the sale. To aid the solid mould a hedging attachedness you bear collected the subjoined notification:

The defacement diversify trounce is $.8924/€

The six month presumptuous trounce is $.8750/€

OTI’s absorb of excellent is 11%

The Euro zone 6-month excellent traffic trounces are 7%-9% pa

The U.S. 6-month excellent traffic trounces are 6%- 8% pa

The guerdon (discretion worth) for December ole discretions delay lower worth $.90 is 1.5%

OTI’s meet for 6-month defacement trounces is $.91/€

The budget trounce, or the main sportive escheatment worth for this plan, is $2,300,000 or $.92/€

 

Assume that analysts attend the subjoined sunencumbered diversify trounce scenarios each delay an resembling verisimilitude of occurance (i.e. 33.3%)

Strong Dollar: $0.8600

Neutral :$0.8750

Weak Dollar :$0.9500

Assume that Oregon clarified to use December ole discretion.What allure be the expected absorb of the reprove cars? (Hint: Use statistical trust to apportion the expected absorb)

A. $2,156,760

B. $2,182,450

C. $2,160,527

D. $2,241,778

E. $2,187,500

 

8. A US guild expects SFR120m specie course 12 months from now. Besides the direct total may deviate +/-20%. Guild develops an partition to career on the best hedging temporization. They meet that defacement diversify trounce can be either SFR1.2030 , 1.375 or 1.5470. They attend vending SFR 96m presumptuous @1.375 and buying SFR48m put discretion @ lower worth SFR1.375/$. They pay $0.0345 per SFR. Assume that express specie courses morose out to be SFR120m. Apportion the net USD vouchers if defacement trounce is SFR 1.5470/USD

A. 87,557,374

B. 89,213,374

C. 69,818,193

D. None of the aloft

 

9. Plains States Manufacturing has sound authorized a curtail to vend unwandering equipment to Boschin, a German solid, for 1,250,000. The sale was made in June delay liquidation due six months succeeding in December. Owing this is a sizable curtail for the solid and owing the curtail is in Euros rather than dollars, Plains States is regarding sundry hedging alternatives to classify the diversify trounce surrender arising from the sale. To aid the solid mould a hedging attachedness you bear collected the subjoined notification.

? The defacement diversify trounce is $1.1740/

? The six month presumptuous trounce is $1.1480/

? Plains States' absorb of excellent is 12% per annum

? The Euro zone 6-month borrowing trounce is 7% per annum (or 3.5% for 6 months)

? The Euro zone 6-month lending trounce is 5% per annum (or 2.5% for 6 months)

? The U.S. 6-month borrowing trounce is 6% per annum (or 3% for 6 months)

? The U.S. 6-month lending trounce is 4.5% per annum (or 2.25% for 6 months)

? December put discretions for 625,000; lower worth $1.18, guerdon worth is 1.5%

? Plains States' meet for 6-month defacement trounces is $1.19/

? The budget trounce, or the smallest sportive sales worth for this plan, is $1,425,000 or $1.14/

 

If Plains States locks in the presumptuous hedge at $1.1480/, and the defacement trounce when the performance was chronicled on the books was $1.174/, this allure outcome in a "foreign diversify missing" assertioning performance of ________.

A. There is not ample notification to vindication this inquiry.

B. $0

C. $32,500

D. This was not a missing; it was a create of $32,500.

 

10. ABC International treasurers entered into a collocate presumptuous curtail (besides oleed nothing absorb cylinder). The curtail requires Escheatment of a euro put discretion for Eur100m at a lower worth USD/EUR1.2800 and sale of Eur100m ole discretion at a lower worth of USD/EUR 1.3500. The guerdon remunerated for the put discretion is $0.01. What would be the net USD vouchers of the ABC if the defacement trounce is USD/EUR1.2930?

A. 128,000,000

B. 135,000,000

C. 129,300,000

D. 128,300,000

E. There is not tit notification to apportion the facultyful voucher.

 

11. Assume that Fisher Effect holds. Grounded on the subjoined traffic notification for Argentina and US, apportion the One-Year "t-bill" trounce for US (Do not use the avenue).

Argentina:

Spot Rate:ARP 3.4375/USD Expected inflation trounce: 8.00% p.a. 1-Year Treasury Bill Yield: 11.00% pa

United States:

Spot Rate: USD 0.2909/ARP Expected Inflation: 2.00% p.a.

1 Year Treasury Bill Yield: ?

A. 5.83%

B. 2.77%

C. 3.77%

D. 4.83%

 

12. Last week ABCLandLira-US dollar diversify trounce moved from ABCL687,000/USD to ABCL1,072,000/USD. Apportion the deterioration of ABCLand lira visa vie US dollar. a-56.00% b- 65.00% c-35.91% d-none of the aloft

A. 35.91%

B. 56%

C. 35.91%

D. none of the aloft

 

13. Oregon Transportation Inc. (OTI) has sound authorized a curtail to escheatment inconsiderable reprove cars from a creator in Germany €2,500,000. The escheatment was made in June delay liquidation due six months succeeding in December. Owing this is a sizable curtail for the solid and owing the curtail is in Euros rather than dollars, OTI is regarding sundry hedging alternatives to classify the diversify trounce surrender arising from the sale. To aid the solid mould a hedging attachedness you bear collected the subjoined notification:

The defacement diversify trounce is $.8924/€

The six month presumptuous trounce is $.8750/€

OTI’s absorb of excellent is 11%

The Euro zone 6-month excellent traffic trounces are 7%-9% pa

The U.S. 6-month excellent traffic trounces are 6%- 8% pa

The guerdon (discretion worth) for December ole discretions delay lower worth $.90 is 1.5%

OTI’s meet for 6-month defacement trounces is $.91/€

The budget trounce, or the main sportive escheatment worth for this plan, is $2,300,000 or $.92/€

 

Assume that analysts attend the subjoined sunencumbered diversify trounce scenarios each delay an resembling verisimilitude of occurance (i.e. 33.3%)

Strong Dollar: $0.8600

Neutral :$0.8750

Weak Dollar :$0.9500

Assume that Oregon clarified to use excellent traffic hedge.What allure be the expected absorb of the reprove cars? (Hint: Use statistical trust to apportion the expected absorb)

A. 2,150,000

B. 2,187,500

C. 2,231,500

D. 2,241,778

 

14. Copy of 7- A US grounded speculator wanted to procure service of haughty private curiosity-behalf trounces in ABC-Land. One month ABC-Land treasuries offered 40% pa curiosity-behalf occasion speculator's US dollar absorb was singly 20%pa. Speculator bought $10,000,000 equiponderant of one-month manliness ABC-Land treasuries when the diversify trounce was at ABCL687. Speculator expected a sinconsiderable deterioration to ABCL690 gone ABC-Land was inferior a crawling peg diversify trounce regime. However, a political exigency led ABC-Land to forfeit the crawling peg and circulation was floated. At the manliness of treasury (in one month) ABCLand Lira was trading at ABCL1,200/USD. Apportion the missing of the speculator?

A. -$5,915,833

B. -$10,166,667

C. -$4,250,833

D. none

 

15. Oregon Transportation Inc. (OTI) has sound authorized a curtail to vend inconsiderable reprove cars to a creator in Germany for 2,500,000. The escheatment was made in June delay liquidation due six months succeeding in December. Owing this is a sizable curtail for the solid and owing the curtail is in euros rather than dollars, OTI is regarding sundry hedging alternatives to classify the diversify trounce surrender arising from the sale. To aid the solid mould a hedging attachedness you bear collected the subjoined notification.

? The defacement diversify trounce is $1.1740/ €

? The six month presumptuous trounce is $1.1480/€

? OTI's absorb of excellent is 12% per annum

? The Euro zone 6-month borrowing trounce is 7% per annum (or 3.5% for 6 months)

? The Euro zone 6-month lending trounce is 5% per annum (or 2.5% for 6 months)

? The U.S. 6-month borrowing trounce is 6% per annum (or 3% for 6 months)

? The U.S. 6-month lending trounce is 4.5% per annum (or 2.25% for 6 months)

? December put discretions for 625,000; lower worth $1.18, guerdon worth is 1.5%

? OTI's meet for 6-month defacement trounces is $1.19/€

? The budget trounce, or the main sportive escheatment worth for this plan, is $2,975,000 or $1.19/ €

 

If OTI elects to hedge its performance inhospitableness in the presumptuous traffic, the guild allure ________ 2,500,000 presumptuous at a trounce of ________.

A. buy, $1.174

B. vend, $1.148

C. buy, $1.148

D. vend, € 1.174

 

16. TropiKana Inc. has sound borrowed€ 1,000,000 to mould improvements to an Italian production seminary and processing settle. If the curiosity-behalf trounce is 5.00% per year and the Euro depreciates athwart the dollar from $1.15/€ at the term the advance was made to $1.12/€at the end of the original year, how plenteous curiosity-behalf and truth allure TropiKana pay at the end of the original year if they reimburse the complete advance plus curiosity-behalf (rounded)?

A. $937,500

B. $1,176,000

C. €937,500

D. $1,050,000

 

17. Plains States Manufacturing has sound authorized a curtail to vend unwandering equipment to Boschin, a German solid, for € 1,250,000. The sale was made in June delay liquidation due six months succeeding in December. Owing this is a sizable curtail for the solid and owing the curtail is in Euros rather than dollars, Plains States is regarding sundry hedging alternatives to classify the diversify trounce surrender arising from the sale. To aid the solid mould a hedging attachedness you bear collected the subjoined notification.

? The defacement diversify trounce is $1.1740/ €

? The six month presumptuous trounce is $1.19/ €

? Plains States' absorb of excellent is 12% per annum

? The Euro zone 6-month borrowing trounce is 7% per annum (or 3.5% for 6 months)

? The Euro zone 6-month lending trounce is 5% per annum (or 2.5% for 6 months)

? The U.S. 6-month borrowing trounce is 6% per annum (or 3% for 6 months)

? The U.S. 6-month lending trounce is 4.5% per annum (or 2.25% for 6 months)

? December put discretions for € 625,000; lower worth $1.18, guerdon worth is 1.5%

? Plains States' meet for 6-month defacement trounces is $1.1480/€

? The budget trounce, or the smallest sportive sales worth for this plan, is $1,425,000 or $1.14/€

 

Plains States would be ________ by an total resembling to ________ delay a presumptuous hedge than if they had not hedged and their predicted diversify trounce for 6 months had been set-right.

A. amelioreprimand off; $52,500

B. worse off; $10,000

C. amelioreprimand off; $10,000

D. worse off; $52,500

 

18. Annual inflation trounces in the US and Turkey were 2% and 20% and 3% and 10% in 2003 and 2004 respectively. The defacement trounce for the New Turkish Lira (TRY) was is 1.55 per US Dollar in January 2003.

The express defacement trounce observed on January 1st 2005 was USD/TRY1.35. Grounded on the PPP trusts which one of the subjoined is a set-right assertion?

A. Turkish Lira is inferiorvalued

B. USD is aggravatevalued

C. Turkish Lira is supervalued

D. Turkish Lira is aggravatevalued

E. None of the aloft

 

19. Suppose that on January 1st the annual absorb of borrowing in Swiss Francs is 5%. The defacement trounce of USD on January 1st is CHF/USD0.98. Six month presumptuous trounce was adduced as CHF/USD 0.95. What is the Swiss Franc absorb of borrowing in USD?

A. 8.32%

B. 5%

C. 4.5%

D. 3.72%

E. None of the aloft

 

20. Suppose annual inflation trounces in the US and Mexico are expected to be 3% and 10% respectively, aggravate the present two years. If the ordinary defacement trounce for the Peso/USD is P12/USD, then referring-to purchasing faculty correspondence suggests that the diversify trounce in three years allure be almost _________.

A. P14.62

B. 12.82

C. P13.69

D. None of the aloft

 

21. Use the subjoined facts to apportion the Net Change in Reserves for Dotcomland :

Private Savings 300bn

Private Investments 310bn

Government Revenues 400bn

Government Expenditures 430bn

Net Statistical Discrepancy -10bn

Capital Assertion +70bn

A. 120bn

B. 60bn

C. 70bn

D. 20

E. none of the aloft

 

22?Suppose you employment for XYZLand-Citicorp in XYZLand. A persomal bank wanted to buy USD50,000,000 three month presumptuous. Gone you fancy XYZLand is a very surrendery environment you deficiency to built 10% room (annual) in your presumptuous worth to assertion for surrender. Ordinary defacement and curiosity-behalf trounces in USD and XYZLand Lira are as follows. What would be your presumptuous adduce?

XYZ circulation/USD 685-700

RUSD: 7.50-8.50 p.a.

RXYZL:35.00-45.00% p.a.

A. 783.5

B. 764.4

C. 840.4

D. none of the aloft

 

23. Oregon Transportation Inc. (OTI) has sound authorized a curtail to escheatment inconsiderable reprove cars from a creator in Germany for 2,500,000. The escheatment was made in June delay liquidation due six months succeeding in December. Owing this is a sizable curtail for the solid and owing the curtail is in euros rather than dollars, OTI is regarding sundry hedging alternatives to classify the diversify trounce surrender arising from the sale. To aid the solid mould a hedging attachedness you bear collected the subjoined notification.

? The defacement diversify trounce is $1.1740/€

? The six month presumptuous trounce is $1.1400/€

? OTI's absorb of excellent is 12% per annum

? The Euro zone 6-month borrowing trounce is 7% per annum (or 3.5% for 6 months)

? The Euro zone 6-month lending trounce is 5% per annum (or 2.5% for 6 months)

? The U.S. 6-month borrowing trounce is 6% per annum (or 3% for 6 months)

? The U.S. 6-month lending trounce is 4.5% per annum (or 2.25% for 6 months)

? December put discretions for 625,000; lower worth $1.18, guerdon worth is 1.5%

? OTI's meet for 6-month defacement trounces is $1.19/€

? The budget trounce, or the main sportive escheatment worth for this plan, is $2,975,000 or $1.19/€

 

If OTI locks in the presumptuous hedge at $1.140/€, and the defacement trounce when the performance was chronicled on the books was $1.178/€ , this allure outcome in a "foreign diversify ________" assertioning performance of ________.

A. missing, $95,000

B. create, €95,000

C. create, $95,000

D. missing, €95,000