If you are a US Investor buying currency call option to buy EUR against US, is it true that you are indirectly buying currency put option contract for US. If it is, how does it work
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If you are a US Investor buying currency call option to buy EUR against US, is it true that you are indirectly buying currency put option contract for US. If it is, how does it work?
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- Today the euro costs $1.35. If the dollar gains strength against the euro at a rate of 3% per year, how much will the euro cost (in dollars) after five years (a) $1.20 (b) $1.41 (c) $1.16 (d) $1.09.Assume that a Malaysian commercial bank's bid quote of US dollar (USD) is RM4.1 and ask price is RM4.2. If you have ringgit, what is the amount of ringgit that you need to purchase 100,000 US dollars?Morning Star Air (China). Morning Star Air, headquartered in Kunming, China, needs US$25,000,000 for one year to finance working capital. The airline has two alternatives for borrowing: Borrow US$25,000,000 in eurodollars in London at 7.250% per annum. Borrow HK$195,000,000 in Hong Kong at 7.00% per annum and exchange these Hong Kong dollars at the present exchange rate of HK$7.8 = US$1.00 for U.S. dollars. At what ending exchange rate would Morning Star Air be indifferent between borrowing U.S. dollars and borrowing Hong Kong dollars?
- D&R A3 2 - 5 Question 2. Currency Swap A Canadian corporation (ACC) has just entered into a two-year currency swap contract with Big Dealer Bank (BDB). The swap contract requires ACC to make semi-annual payments in Canadian dollars (C$) and receive semi-annual payments in U.S. dollars (US$). The notional amount in Canadian dollars is C$25 million. The accrual period for the swap is 180/360, assuming 360 days per year. The US$/C$ spot exchange rate is 0.77, with the Canadian dollar being the domestic currency for ACC. The term structures of C$ LIBOR and US$ LIBOR are as follows: Days C$ LIBOR (%) US$ LIBOR (%) 180 0.50 0.55 360 0.60 0.65 540 0.65 0.75 720 0.70 0.85 Assume 240 days has passed since the initiation of the currency swap contract. The new exchange rate is US$0.85/C$. Assume that, on Day 180, the 180-day C$ and U.S.$ LIBORs remained the same, at 0.5% and 0.55%, respectively. Calculate the value of the swap given the following…D&R A3 2 - 3 Question 2. Currency Swap A Canadian corporation (ACC) has just entered into a two-year currency swap contract with Big Dealer Bank (BDB). The swap contract requires ACC to make semi-annual payments in Canadian dollars (C$) and receive semi-annual payments in U.S. dollars (US$). The notional amount in Canadian dollars is C$25 million. The accrual period for the swap is 180/360, assuming 360 days per year. The US$/C$ spot exchange rate is 0.77, with the Canadian dollar being the domestic currency for ACC. The term structures of C$ LIBOR and US$ LIBOR are as follows: Days C$ LIBOR (%) US$ LIBOR (%) 180 0.50 0.55 360 0.60 0.65 540 0.65 0.75 720 0.70 0.85 Calculate the first semi-annual payments for the swap if the terms of the swap specify that ACC receives fixed rates and pays floating rates.U.S. / U.K. Foreign Exchange Rate, U.S. Dollars to One British Pound (n = 60 days) Date Rate 1-Nov 1.2950 4-Nov 1.2906 5-Nov 1.2870 6-Nov 1.2872 7-Nov 1.2829 8-Nov 1.2790 12-Nov 1.2855 13-Nov 1.2840 14-Nov 1.2879 15-Nov 1.2901 18-Nov 1.2965 19-Nov 1.2926 20-Nov 1.2918 21-Nov 1.2915 22-Nov 1.2829 25-Nov 1.2885 26-Nov 1.2850 27-Nov 1.2881 29-Nov 1.2939 2-Dec 1.2936 3-Dec 1.3002 4-Dec 1.3095 5-Dec 1.3165 6-Dec 1.3127 9-Dec 1.3157…
- At the start of May, you purchased some shares in Apple (a US company) for $US 43.87, and hedged your position using forward contracts (hedging the purchase value of the shares). The exchange rate at the time of purchase was $US1 = $NZ 2.73, while the one month NZ interest rate was 7.90% and the one month US interest rate was 7.30% (both rates are per annum, with monthly compounding). At the end of May, the exchange rate was $US1 = $NZ 2.78, while the shares were worth $US 41.63. Apple paid no dividends during May. What was your ($NZ) holding period return over the month of May?Eurobike, based in Germany will need TL2 mn in 2 years to pay for imports. The annual interest rate in the next 2 years is 3% in Europe and 10% in Turkey. Assume interest rate parity holds. Determine the appropriate forward premium or discount on TL? Calculate the €s Eurobike will need in 2-years to make the payment, assuming spot rate of EURTL is 7?Assume your company has a contract to purchase 100,000 computers from a Korean company. The payment is due on receipt of the shipment and must be delivered in Korea on July 31, 2024. In December 2023, when you are arranging the contract, the computers are priced at 500,000 won each. The spot rate in December 2023 is $1 in exchange for 1,250 won. The Korean won is expected to cost 10% more compared with the U.S. dollar when payment is due in July 2024. What would you advise your firm to do to avoid a loss on the deal? $/francE $/£E
- How could (2) the acquisition of a Moldovan soft drinks company by a US company for 5 million dollars in 2018 and (3) annual profits from the US investment in Moldova at 145.000 $ in 2019 be recorded in the balance payments in Moldova and the USA in 2018 and 2019. (Please answer 2 and 3 seperately.)In 30 days Radio Shack must pay yen to a Japanese supplier for a shipment of radios arriving then. Radio Shack can sell each radio for $100 and must pay its supplier ¥9,000 per radio; its profit depends on the dollar/ yen exchange rate. The current spot exchange rate, E$/¥ = $0.0105 per yen. Radio Shack will not have the funds to pay the supplier until the radios arrive and are sold. Over the next 30 days, the dollar may depreciate to $0.0115 per yen, and Radio Shack may incur a loss. Describe how Radio Shack can use a forward exchange deal to insure against the possibility that the depreciation of U.S. currency will turn a profitable importing deal into a loss.1. Suppose that the value of $1 in Japanese yen decreases at the rate of 2% per year. a) Write the differential equation that the value of a dollar in yen D(y) satisfies and write the solution of the equation b) Starting from $1 = 250 ???, how long will it take for $1=1 ???