Question

Your firm is based in the U.S. and one of your primary suppliers is located in...

Your firm is based in the U.S. and one of your primary suppliers is located in the Czech Republic. One way for your firm to transfer foreign exchange risk (associated with your firm’s accounts payable) to your supplier is to

a.

sell the Czech supplier a futures contract
b.

increase the price of the merchandise
c.

have the invoice denominated in dollars
d.

both a and b

1.A foreign exchange rate may be defined as

a.

the amount of a second currency that can be purchased an unit of another currency
b.

the interest rate of the overnight funds in the foreign country's money market
c.

the number of units of gold that can be bought in a foreign country for one unit of that country's currency
d.

the price of a futures contract in the financial futures market
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

I have answered the question below

Please up vote for the same and thanks!!!

Do reach out in the comments for any queries

Answer:

20 c. have the invoice denominated in dollars. Correct option

In this way the firm based in US will get fixed dollar amount and any appreciation or depreciation in Czech Republic currency needs to be bear by foreign company only.

21 A. the amount of a country s currency that can be purchased an unit of another country s currency

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
. Suppose that your firm, based in the U.S. with assets in $US, signs a contract...
. Suppose that your firm, based in the U.S. with assets in $US, signs a contract to buy a custom-made airplane from a French aircraft manufacturer. The contract price is 100 million euros with delivery of the plane in exactly one year, when you will have to make the payment in full. The interest rate at which you can borrow or lend euros is 6 percent and the interest rate that you can borrow or lend U.S. dollars is 4...
Suppose that your firm, based in the U.S. with assets in $US, signs a contract to...
Suppose that your firm, based in the U.S. with assets in $US, signs a contract to buy a custom-made airplane from a French aircraft manufacturer. The contract price is 100 million euros with delivery of the plane in exactly one year, when you will have to make the payment in full. The interest rate at which you can borrow or lend euros is 6 percent and the interest rate that you can borrow or lend U.S. dollars is 4 percent....
Your firm is located in the U.S and a major customer is located in Europe. DUe...
Your firm is located in the U.S and a major customer is located in Europe. DUe to historical negotiations, your customers pay your firm in euros. Your firm has just recorded a sale to the customer for 50,000,000 pounds. The cusotmer has 30 days to pay the invoice. The current spot rate is 1 pound = $1.38. The foreign exchange expert at your firm believes the foreign exchange rate in 30 days will either be 1 pound = $1.10 or...
Question text Hedges of foreign-currency-denominated firm commitments Spot and forward rates for the euro are: Spot...
Question text Hedges of foreign-currency-denominated firm commitments Spot and forward rates for the euro are: Spot rate Forward rate for January 15, 2019 delivery December 15, 2018 $1.290 $1.300 December 31, 2019 1.320 1.325 January 15, 2019 1.330 1.330 On December 15, 2018, a U.S. company issues a purchase order for merchandise costing €1,000,000 from suppliers in Germany. The company plans to pay the suppliers on delivery of the merchandise, scheduled for January 15, 2019. On December 15, the company...
If on Tuesday you can buy 125 yen per U.S. dollar and on Wednesday you can...
If on Tuesday you can buy 125 yen per U.S. dollar and on Wednesday you can buy 120 yen per U.S. dollar, a. both the U.S. dollar and the yen have appreciated. b. both the U.S. dollar and the yen have depreciated. c. the U.S. dollar has appreciated and the yen has depreciated. d. the U.S. dollar has depreciated and the yen has appreciated. If the U.S. dollar appreciates in the foreign exchange market, a. American goods will become more...
T or F 11) In the Shareholder Wealth Maximization Model the primary goal of management is...
T or F 11) In the Shareholder Wealth Maximization Model the primary goal of management is to maximize the wealth of all stakeholders. T or F 12) Poor firm performance is more likely to lead to takeover or firm restructuring under the Shareholder Wealth Maximization than under the Stakeholder Capitalism Model. T or F 13) LIBOR is the London Inter-Bank Offer Rate and represents the rate at which London banks are willing to lend to other London banks. T or...
Your firm makes a zero cost contract with a bank to hedge the foreign exchange risk....
Your firm makes a zero cost contract with a bank to hedge the foreign exchange risk. In the contract you buy 1 down-and-out put with a barrier price of 900 and sell two up-and-in calls with a barrier price of 1000. Both options have a strike price of 950. At maturity the price of a foreign currency is 1030. What is your profit? a. -160 b. 0 c. -130 d. 80 e. -80
Vino Veritas Company, a U.S.-based importer of wines and spirits, placed an order with a French...
Vino Veritas Company, a U.S.-based importer of wines and spirits, placed an order with a French supplier for 1,800 cases of wine at a price of 290 euros per case. The total purchase price is 522,000 euros. Relevant exchange rates for the euro are as follows: Date Spot Rate Forward Rate to October 31 Call Option Premium for October 31 (strike price $1.45) September 15 $ 1.45 $ 1.51 $ 0.045 September 30 1.50 1.54 0.080 October 31 1.55 1.55...
Assume your U.S. firm has a contract to purchase 100,000 computers from a Korean company. The...
Assume your U.S. firm has a contract to purchase 100,000 computers from a Korean company. The payment is due on receipt of the shipment and must be delivered in Korea on December 31, 2018. In July 2018, when you are arranging the contract, the computers are priced at 500,000 won each. The spot rate in July 2018 is $1 in exchange for 1,088 won. A) Calculate the U.S. dollar price (in July 2018) of one unit of Korean currency.(4 points)...
Suppose that you borrowed 10 million Japanese yen for one year. is your foreign exchange risk?...
Suppose that you borrowed 10 million Japanese yen for one year. is your foreign exchange risk? Describe how forwards, futures, options, and swaps can be used to hedge your foreign exchange risk. What is the difference between an interest rate swap and a currency swap?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT