Question

A year ago, a German investor bought a piece of land in Canada for $1,000,000 CAD. The exchange rate at the time was 0.6723 Euro per CAD. The German investor borrowed all the money in Euros using a 10 year note with an annual rate of 3%. What were the monthly payments in Euros? 5 points Today, the exchange rate is 0.6516 Euro per CAD. The investor sells the property and has an annual return of 17% in Euros. What was the selling price of the property in CAD? 10 points How much equity (in Euros) is in the property today? 5 points Has the CAD gotten weaker or stronger relative to the Euro over the last year? 5 points Did the change in the exchange rate help the German investor or hurt? Explain\

BAII PLUS

Answer #1

5. A year ago, silver was selling for $15.12 an ounce and the
USD per GBP exchange rate was 1.259. Today silver is selling for
$17.83 an ounce and the exchange rate is 1.273 USD per GBP. A
British investor bought the silver a year ago and sold it today,
how much would she have made in GBP? 10 points Has
the USD gotten weaker or stronger relative to the GBP over the last
year? 5 points Did the change...

9) In September 2009 a U.S. investor chooses to invest $500,000
in German equity securities at a then current spot rate of
$1.30/euro. At the end of one year the spot rate is $1.35/euro. How
many euros will the U.S. investor acquire with his initial $500,000
investment?
A) €650,000
B) €370,370
C) €500,000
D) €384,615
10) Not all firms have the same optimal capital structure.
Factors that might influence a firm's capital structure
include:
A) the industry in which it...

Suppose you are a Euro based investor who bought a share of
Apple at $300 when the USD/Euro exchange rate was $1.20/Euro. You
sell your share when Apple is worth $350 and the exchange rate is
$1.10/Euro. You owned your shares for one year. Annual interest
rates are 5% on the Euro and 10% on the USD, and you hedge your
currency exposure by going short exactly $350 in the Forward market
As a Euro based investor, what is your...

Instruction 13.1:
In September 2009 a U.S. investor chooses to invest $500,000 in
German equity securities at a then current spot rate of $1.30/euro.
At the end of one year the spot rate is $1.35/euro.
7) Refer to Instruction 13.1. How many euros will the U.S.
investor acquire with his initial $500,000 investment?
A) €650,000
B) €370,370
C) €500,000
D) €384,615
8) Refer to Instruction 13.1. At an average price of €60/share,
how many shares of stock will the investor...

Foreign Exchange (FOREX) Problem Set
1. You in US have an accounts payable to a German exporter for
200 Porsche Cayenne SUVs. The seller offers a 2 percent discount
for payment within 10 days and full payment due in 30 days (2/10
net 30). Today the exchange rate is $1.40 per Euro. You notice that
the 30 day forward rate for the $/Euro is $1.38. What should you
do? Pay now with early payment discount or wait until end of...

Veterans and Co. bought a building and agreed to pay the
seller $15,000 every year for 20 years (starting one year from
today). Assuming an annual effective interest rate of 5%, what is
the value of Veterans and Co. note payable at the time of the
purchase? (2 points)
Company A agreed to pay Company B $1,100 every month for
a year (starting one month from today, so 12 payments in total) in
exchange for a piece of equipment. Assuming...

1-What should an investor pay for an investment property
promising a $200,000 return after 10 years if a 7% annual return
(compounded annually) on investment is projected?
2-Given the following information on a 30-year fixed-payment
fully-amortizing loan, determine the remaining balance that the
borrower has at the end of five years. Interest Rate: 4%, Monthly
Payment: $3,000
3-An investor has an opportunity to invest in a rental property
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George Robbins considers himself an aggressive investor. He's
thinking about investing in some foreign securities and is looking
at stocks in (1) Bayer AG, the big German chemical and
health-care firm, and (2) Swisscom AG, the Swiss
telecommunications company.
Bayer
AG, which trades on the Frankfurt Exchange, is currently priced
at
51.99
euros
(€)
per share. It pays annual dividends of
1.41
euro per share. Robbins expects the stock to climb to
61.04
euro per share over the next 12...

a. You bought a car 5 years ago for $30,000. This type of car is
known to depreciate at a compounded annual rate of
8% per year (given normal mileage and wear-and-tear). If your car
depreciated at this rate, how much is it worth today? (Hint: let r
= -0.08 and solve for FV).
c. If you deposit $1000 today in an account earning 10% APR
compounded annually, and you deposit another $1000 next year (at
same rate), and finally...

Indiana Company expects to receive 5 million euros in one year
from exports.It can use any one of the following strategies to deal
with the exchange rate risk. Estimate the dollar cash flows
received as a result of using the following strategies:
a). unhedged strategy
b). money market hedge
c). option hedge
The spot rate of the euro as of today is $1.30. Interest rate
parity exists. Indiana Company uses the forward rate as a predictor
of the future spot...

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