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unc.3
Your company can get yen loans for 2.0%. Dollar rates on the same loans are 4.5%. The spot yen per dollar exchange rate is 104. The forward rates for years 1 thru 4 are, 101.51, 99.08, 96.71, and 94.40, respectively. What is the present value of the market-maker's net cash flow if spot rates are 102 instead?
A) $188.59
B) $206.43
C) $219.96
D) $242.06
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- Suppose a firm makes purchases of $3.65 million per year under terms of 2/10, net 30, and takes discounts. What is the average amount of accounts payable net of discounts? (Assume the $3.65 million of purchases is net of discounts—that is, gross purchases are $3,724,489.80, discounts are $74,489.80, and net purchases are $3.65 million.) Is there a cost of the trade credit the firm uses? If the firm did not take discounts but did pay on the due date, what would be its average payables and the cost of this nonfree trade credit? What would be the firm’s cost of not taking discounts if it could stretch its payments to 40 days?Newstar Co. expects to pay 500,000 euro in one year. Assume the annual interest rate of borrowing or lending euro is 1% and the annual interest rate of borrowing or lending U.S. dollar is 2%. The spot rate of euro is $1.12 per euro. How much guaranteed amount of U.S. dollar does the company expect to pay after hedging the euro payable transaction in the international money market? (pick the closest answer) A. 565,545 USD. B. 554,510 USD. C. 562,786 USD. D. 576,912 USD.GBA Company wishes to raise $5,000,000 with debt financing. The funds will be repaid with interest in 1 year. The treasurer of GBA Company is considering three sources: i. Borrow USD from Citibank at 1.50% ii. Borrow EUR from Deutsche Bank at 3.00% iii. Borrow GBP from Barclays at 4.00% If the company borrows in euros or British pounds, it will not cover the foreign exchange risk; that is, it will change foreign currency for dollars at today’s spot rate and buy foreign currency back 1 year later at the spot rate prevailing then. The GBA Company has no operations in Europe. A representative of GBA contacts a local academic to provide projections of the spot rates 1 year in the future. The academic comes up with the following table: Currency Spot Rate Projected Rate 1 Year in the Future USD/GBP 1.5 1.55 USD/EUR 0.95 0.85 What are the projected USD/GBP rate and USD/EUR rate for which the expected interest costs would be the same for the three…
- GBA Company wishes to raise $5,000,000 with debt financing. The funds will be repaid with interest in 1 year. The treasurer of GBA Company is considering three sources: i. Borrow USD from Citibank at 1.50% ii. Borrow EUR from Deutsche Bank at 3.00% iii. Borrow GBP from Barclays at 4.00% If the company borrows in euros or British pounds, it will not cover the foreign exchange risk; that is, it will change foreign currency for dollars at today’s spot rate and buy foreign currency back 1 year later at the spot rate prevailing then. The GBA Company has no operations in Europe. A representative of GBA contacts a local academic to provide projections of the spot rates 1 year in the future. The academic comes up with the following table: Currency Spot Rate Projected Rate 1 Year in the Future USD/GBP 1.5 1.55 USD/EUR 0.95 0.85 What is the expected interest rate cost for the loans in EUR and GBP?A3) Finance Currently, the GBP/USD rate is 1.5050 and the three-month forward exchange rate is 1.5269. The three-month interest rate is 6.2% per annum in the U.S. and 4.1% per annum in the U.K. Assume that you can borrow £1,000,000 or its equivalent in USD. How much do you make/lose if you borrow the local currency and invest abroad? (USD, no cents)Below is the information regarding U.S. and Canadian annualized interest rates: Currency Lending Rate Borrowing Rate U.S Dollar ($) 6.73% 7.20% Euro (€) 6.80% 7.28% Note: Spot rate of Euro is $1.13 An international bank can borrow either 20 million U.S. dollars or 20 million euro. The bank expects the spot rate of the euro is $1.10 in 90 days, which is equal to ______ profit. A. $583,800 B. $588,200 C. $584,245 D. $579,845
- XYZ entered into a currency swap with its bank, and borrowed $10 million at 9% and swaps for a 11% yen loan. The spot exchange rate is 95/$. How much is the annual interest to be paid to the bank. (Please use currency swap rating and Answer should be $2,000,000?)I would appreciate it if this was done in excel please A US bank converts $ 1 million to SF to make an SF loan to a valued customer when the exchange rate was 1.53 SF per USD. The borrower agrees to repay the principal plus 6.25% interest in one year. The borrower repaid SF at loan maturity and when the loan was repaid the exchange rate was 1.63 SF per USD. What was the bank's dollar rate of return?EUROCREDIT LOAN:A Swiss sporting goods company borrows in yen in the Eurocredit market at a rate of 4.94 percent from Bank of America using a three-month rollover loan. Bank of America assigns a default risk premium of 1.93 percent on the loan, and the country risk is an additional 0.76 percent. The bank can borrow funds in the Euromarket at the three-month LIBOR rate of 0.30 percent. What is Bank of America’s gross profit margin on this loan?
- list down base rate and quote rate currency from question 1 to 5 1. Jack Ma, a foreign exchange trader in Canada, has CAD. 4,000,000 for short-term money market investment and wants to make a profit based on the following rates. Explain specific steps that Jack Ma must take to make a covered interest arbitrage. CAD= Canadian Dollar JYP= Japanese Yen 6-month Canadian interest rate 1.6% per annum 6-month Yen interest rate 2.95% per annum Spot rate JYP 93.1395/CAD 6-month forward rate JYP 93.8380/CAD 2. Cecilia who is a currency trader in Japan observes the following market conditions: • Annual interest rate in Japan: 1.5% per annum • Annual interest rate in France: 7.0% per annum • Current spot exchange rate: ¥ 114.4733/€ • One-year forward exchange rate: ¥ 110.2423/€ • No transaction costs If Cecilia can borrow ¥100,000,000, specific the transactions he may carry out in order to make some arbitrage profit and calculate the amount of the profit. 3. Given…Q6. A financial institution has borrowed a one-year $20 million Eurodollar deposit at an annual interest rate of 1.5 percent. It has invested these proceeds in one-year Euro (€) bonds at an annual rate of 2.5 percent after converting them at the current spot rate of €1.22/$. Both interest and principal are paid at the end of the year. What is the spread earned by the bank at the end of the year if the exchange rate remains at €1.22/$? a) 1.50 percent b) 2.50 percent c) 0.50 percent d) 1 percent e) 2.00 percentKF1. Exquisite Jewelers has purchased 100 pounds of silver from Silver Mines Ltd. at US$8,000 per pound payable in one year. The current spot exchange rate is 1.6295 (C$/US$) and the one year forward rate, quoted by the company’s bank, is 1.6312. The Financial Controller at Fine Jewelers suggests that the spot rate in one year will be 1.6224. Interest rates in Canada are currently 3.9 percent for one year and 3.7 percent in the United States. Required: a) Outline, with calculations, three alternative actions available to Golden Jewelers to handle its foreign exchange exposure. b) Advise the company which alternative they should take, providing the reason for your recommendation
