International Financial Management
14th Edition
ISBN: 9780357130698
Author: Madura
Publisher: Cengage
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If the Canadian dollar appreciate by 5% relative to the British pound, what will be the percentage British pound depreciate?
If the Swiss franc depreciates against the U.S. dollar, can a dollar buy moreor fewer Swiss francs as a result?
If British pounds sell for $1.30 (U.S.) per pound, what should dollars sellfor in pounds per dollar?
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- Suppose that California Co., a U.S. based MNC, seeks to capitalize a difference in interest rates between euros and British pounds via the use of a carry trade. In particular, after 1 month, funds invested in euros will yield a 0.50% percent return, while funds invested in pounds will yield a return of 2.00% percent. Currently the spot rate of the British pound is $1.00 while the spot rate of the euro is $0.80. In other words, the pound is worth 1.25 euros. California Co. expects these spot rates to remain constant over the next month. After repaying their euro loan, California Co. has 211,200 pounds remaining. Assume that the exchange rate is still $1.00 per pound. These pounds are equivalent to $ , which represents a profit of $ over the initial $200,000 that California Co. used from their own funds.arrow_forwardExperts please reject this question - I'm testing a flow. Today, the US dollar is trading at ₵4.60, compared to ₵4.20 a year ago. What is the percentage appreciation/depreciation of the dollar relative to the cedi? What is the percentage appreciation/depreciation of the cedi relative to the dollar? Please comment on your results.arrow_forwardThe chapter demonstrated that a firm borrowing in a foreign currency could potentially end up paying a very different effective rate of interest than what it expected. Using the same baseline values of a debt principal of SF1.5 million, a one year period, an initial spot rate of SF1.5000/$, a 5.000% cost of debt, and a 34% tax rate, what is the effective cost of debt for one year for a U.S. dollar-based company if the exchange rate at the end of the period was: a. SF1.5000/$ b. SF1.4400/$ c. SF1.3860/$ d. SF1.6240/%arrow_forward
- To force the value of the British pound to depreciate against the dollar, the Federal Reserve should: A. sell pounds for dollars in the foreign exchange market and the Bank of England should sell pounds for dollars in the foreign exchange market. B. sell dollars for pounds in the foreign exchange market and the Bank of England should sell pounds for dollars in the foreign exchange market. C. sell dollars for pounds in the foreign exchange market and the Bank of England should sell dollars for pounds in the foreign exchange market. D. sell pounds for dollars in the foreign exchange market and the Bank of England should sell dollars for pounds in the foreign exchange market.arrow_forwardSome of the websites show graphs indicating how one currency has done relative to another currency. a. Over the past year, how has the pound performed against the dollar? Does the dollar buy more or less pounds today than it did 1 year ago? b. Over the past year, how has the dollar performed against the yen? Does the dollar buy more or less yen today than it did 1 year ago?arrow_forwardSuppose that one year ago the spot rate for the British pound was $1.68 per pound, while the spot rate for the peso was $1.05 per peso. The cross rate of the British pound one year ago was £1 = pesos. Suppose that now the spot rate for the British pound is $2.00 per pound, while the spot rate for the peso was $1 per peso. Now, the cross rate of the British pound is £1 = pesos. This represents a percent change in the cross rate of the British pound.arrow_forward
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