xpected inflation in the U.S. is 8%, expected inflation in France is 12%, and the one-year risk-free rate in the U.S. is 4%, what would the one-year risk-free rate have to be in France for real interest rate parity to hold? A company has total book value of common stock equal to $650000, a par value of $1 per share, 150000 shares issued and outstanding, and the market value of the common stock is $85 a share. a. What is the company's additional paid-in capital? b. What is the market capitalizatio

xpected inflation in the U.S. is 8%, expected inflation in France is 12%, and the one-year risk-free rate in the U.S. is 4%, what would the one-year risk-free rate have to be in France for real interest rate parity to hold? A company has total book value of common stock equal to $650000, a par value of $1 per share, 150000 shares issued and outstanding, and the market value of the common stock is $85 a share. a. What is the company's additional paid-in capital? b. What is the market capitalizatio

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter27: Multinational Financial Management

Section: Chapter Questions

Problem 12P

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Similar questions

Suppose a U.S. investor wishes to invest in a British firm currently selling for 50 pounds per share by buying 200 shares of the British firm. The current exchange rate is $1.31 per pound. After one year, the exchange rate is $1.60 per pound and the share price is 59 pounds per share. What is the dollar-denominated return in percentage?
Suppose that a French firm would like to have its stock available through an American Depository Receipt (ADR). If the firm’s stock is currently selling for €75 and that the exchange rate between the € and the $ is €1.0=$1.0592. What price should we expect for the ADR in US dollars? Suppose that over the next year the dollar reaches parity with the Euro, i.e., $1.00=€1.00 and that the price of the French firm’s stock rises to €100. What would expect the price of the ADR to be?
A financial institution has just sold 1,000,000 6-month European call options on the Japanese yen. Suppose that the spot exchange rate is 0.80 cents per yen, the exercise price is 0.81 cents per yen, the risk-free rate on the US dollar is 2.5% per annum, the risk-free rate in Japan is 0.5% per annum, and the volatility of the yen is 10% per annum. Calculate the delta (D), gamma (G), vega (n), theta (Q), and rho (r) of the financial institutions' position. Interpret with an explanatory sentence the meaning of each of the calculations.
The expected return on a share of ExxonMobil stock in the U.S. is 15.6% while the expected return on a share of Royal Dutch Shell stock is 12.6% in the Netherlands. If the pure rate of return is 2% in both countries and the required risk premium is 6% for each company's stock, what is the long-term expected inflation rate in each country if the multiplicative form of the Fisher model is used in making the calculations?
Assume that the consensus required rate of return on common stocks is 13 percent. In addition, you read in Fortune that the expected rate of inflation is 6 percent and the estimated long-term real growth rate of the economy is 3 percent. What interest rate would you expect on U.S. government T-bills? Round your answer to two decimal places.
A financial institution has just bought 4-month European call options on the Chinese yuan.Suppose that the spot exchange rate is 14 cents per yuan, the exercise price is 15 cents per yuan,the risk-free interest rate in the United States is 1.5% per annum, the risk-free interest rate in Chinais 3.5% per annum, and the volatility of the yen is 16% per annum. Calculate the gamma of thefinancial institution’s position. Check the accuracy of your gamma estimate for a 0.1 cent increasein yuan.
Suppose a U.S. investor wishes to invest in a British firm currently selling for £100 per share. The investor has $24,000 to invest, and the current exchange rate is $2/£. Required:a. How many shares can the investor purchase? (Round your answer to the nearest whole number.) b. Fill in the table below for dollar-denominated rates of return after one year in each of the nine scenarios (three possible share prices denominated in pounds times three possible exchange rates). (Round your percentage answers to 2 decimal places. Negative amounts should be indicated by a minus sign.)
In the spot market, 1 Philippine peso can be exchanged for 2.51 Japanese yen. In the 1-year forward market, 1 Philippine peso can be exchanged for 2.53 Japanese yen. The 1-year, risk-free rate of interest is 5 percent in the Philippines. If interest rate parity holds, what is the yield today on 1-year, risk-free Japanese securities?
Required: Suppose you are a euro-based Italian investor, and you are investing €11,200 to buy shares of a British company at £50 per share. The exchange rate is €1.40 per pound. The stock pays a £1 dividend one year later, and you sell your shares for £54. The exchange rate has changed to €1.45 per pound at the time of your sale. What is your pound rate of return on this investment and the change in pound-euro exchange rate? What is your euro rate of return? If you had agreed at the outset to sell £8,000 forward at the rate of €1.35 per pound, what is your euro rate of return on this investment? Note: Enter your answer as a percent rounded to 2 decimal places. Pound rate of return % _____ Change in pound-euro exchange rate % _______ Euro rate of return on €11200 inverstment % ___________ Euro rate of return on €8,000 forward sale % ________