Suppose that a US-based company is buying Chinese goods. Current exchange rate for Chinese Yuan is 0.15 USD. The price of goods is ¥13,000 per unit. The company is buying 800 units per year with a fixed contract for the next two years. Suppose that Chinese Yuan appreciate to 0.2 USD in the next year. The US importer will respond to this by lowering the demand the third year. 600 units in What cash flow will be reflected on the balance of payments at the end of the third year? Your Answer:
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- Suppose your company imports computer motherboards from Singapore. The exchange rate is currently 1.3356 S$/US$. You have just placed an order for 30,000 motherboards at a cost to you of 218.50 Singapore dollars each. You will pay for the shipment when it arrives in 90 days. You can sell the motherboards for $175 each. a. Calculate your profit if the exchange rate stays the same over the next 90 days. Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. Calculate your profit if the exchange rate rises by 10 percent over the next 90 days. Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. c. Calculate your profit if the exchange rate falls by 10 percent over the next 90 days. Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. d. What is the break-even exchange rate? Note: Do not round…the current spot exchange rate is $1.85/pound and the three-month forward rate is $1.80/pound. based on your analysis of the exchange rate, you are pretty confident that the spot exchange rate will be $1.82/pound in three months. assume that you wouldlike to buy or sell 1,000,000 pounds. what actions do you need to take to use these rates to earn a profit? what is the expected dollar profit from speculation? what would be your speculative profit in dollar terms if the spot exchange rate actually turns out to be $1.76/poundSuppose you are a U.S. investor who is planning to invest $100,000 in China. Your Chinese investment gains 5%. If the exchange rate moves from 7.12 Yuan per dollar to 7.14 Yuan per dollar over the period, what is your total return on this investment?
- A US firm anticipates receiving 10 million Swedish Krona (SEK) in one year from a new contract that they just signed. They plan to pay this out as a dividend once they receive it. They also plan to use a forward contract to lock in an exchange of the SEK to US dollars. The current savings rate in the US is 1%/year and the rate to save in SEK is 2.8%/year. The current exchange rate is 0.1475 USD per SEK. What is the present value of 10 million SEK to be received at time t = 1 in SEK? (b) What is the present value of 10 million SEK to be received at time t = 1 in US dollars? (c) What is the future value, at t = 1, of 10 million SEK to be received at time t = 1 in US dollars?Suppose that the current spot exchange rate is €0.80/$ and the three-month forward exchange rate is €0.7813/$. The three-month interest rate is 5.60 percent per annum in the United States and 5.40 percent per year in France. Assume that you can borrow up to $1,000,000 or €800,000. Assume that you want to realize profit in terms of euros. Determine the arbitrage profit in euros.An American firm wants to borrow 100 million USD for 1 year to fund a capital investment project. The firm can borrow the money from a U.S. bank at an interest rate of 6%. Alternatively, the firm could borrow British pounds at a rate of 3% a year. At the end of the year, the firm would pay back the loan and interest. The initial exchange rate is 1 GBP = 2 USD. If at the end of the year the exchange rate changes from 1 GBP = 2 USD to 1 GBP = 3 USD, what was the actual cost of borrowing (effective interest rate) if the American firm chose to obtain the loan in British pounds?
- the current spot exchange rate is $1.85/£ and the three-month forward rate is $1.80/£. Based on your analysis of the exchange rate, you are pretty confident that the spot exchange rate will be $1.82/£ in three months, assume that you would like to buy or sell £1,000,000. a) what actions do you need to take to use these rates to earn a profit? what is the expected dollar profit from speculation? b) What would be your speculative profit in dollar terms if the spot exchange rate actually turns out to be $1.76/£Suppose one-year German Treasury bill pays 4.13% and one-year Canadian Treasury bill pays 2.95%. The current spot exchange rate is 1 Euro (EUR)= 1.3694 Canadian dollar (CAD) and the one-year forward exchange rate is 1 EUR = 1.3335 CAD. How much arbitrage profit can an investor earn on an investment value of CAD 4 million Answer: CAD (DO NOT ROUND YOUR CALCULATIONS UNTIL YOU REACH THE FINAL ANSWER. ENTER YOUR RESPONSE ROUNDED TO TWO DECIMAL PLACES AND NO SEPARATOR FOR THOUSANDS.)Suppose you are a U.S. investor who is planning to invest $785,000 in Mexico. Your Mexican investment gains 10%. If the exchange rate moves from 12.2 pesos per dollar to 12.5 pesos per dollar over the period, what is your total return on this investment?
- In June 2006, a Korean investor is considering investing 100 Wons in bank deposits in Korea (in Won) or Japan (in Yens). The annual interest rate on Korean deposits is 6.25%, versus 2% on deposits in Japan. Suppose that the current exchange rate in June 2006 is 8 Wons/Yen and the expected exchange rate in June 2007 is Fwon/Yen= 8.2 Wons/Yen. What is the best investment strategy for the Korean investor? Explain carefully why? Does the interest parity hold? Why or why not?Suppose your company imports computer motherboards from Singapore. The exchange rate is $1.4073 per Singapore dollar. You have just placed an order for 35,062 motherboards at a cost to you of S158 Singapore dollars each. You will pay for the shipment when it arrives in 90 days. You can sell the motherboards for $113 each. Calculate your profit if the exchange rates goes down by 14.51% over the next 90 days.Suppose your company imports computer motherboards from Singapore. The exchange rate is $1.3595 per Singapore dollar. You have just placed an order for 39328 motherboards at a cost to you of S146 Singapore dollars each. You will pay for the shipment when it arrives in 90 days. You can sell the motherboards for $118 each. Calculate your profit if the exchange rates goes down by 12.23% over the next 90 days. NOTE: Enter the number rounding to four DECIMALS. If your decimal answer is 0.034576