Question

Stylelogic Inc. needs €1,000,000 in 30 days. They can earn 5 percent annualized on a German security. The current spot rate for the euro is $1.00. Samson can borrow funds in the United States at an annualized interest rate of 6 percent. If Samson uses a money market hedge, how much should it borrow in the United States

Group of answer choices

$952,381

$995,851

$943,396

$995.025

Answer #1

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Assume the following information. • Interest rate on borrowed
euros is 5 percent annualized. • Interest rate on dollars loaned
out is 6 percent annualized. • Spot rate is 1.10 euros per dollar
(one euro = $0.909). • Expected spot rate in five days is 1.15
euros per dollar. • Fabrizio Bank can borrow 10 million
euros.
If Fabrizio Bank attempts to capitalize on the above information,
its profit over the five-day period is
please show steps. thanks

Suppose that the annual interest rate is 3.25 percent in the
United States and 4 percent in Germany and that the spot exchange
rate is $1.50/€ and the forward exchange rate, with one-year
maturity, is $1.55/€. Assume that an arbitrager can borrow up to
$1,000,000 or its equivalent in Euro. If an astute trader finds an
arbitrage, what is the net cash flow in one year in dollar and in
Euro?

Canada Export Inc. (CEI) is a Canadian MNC that needs to pay
€240,000 in one year to a German supplier. The current spot rate is
CAD$ 1.50 per €. The interest rate in Canada is 3 percent and the
interest rate in Germany is 4 percent. CEI decides to use a money
market hedge to mitigate all of exchange rate risk. What is the
€240,000 payables worth in CAD$?
A.
CAD$ 158,462.
B.
CAD$ 161,553.
C.
CAD$ 356,538.
D.
CAD$...

Suppose that the annual interest rate is 2.47 percent in the
United States and 4.25 percent in Germany, and that the spot
exchange rate is $1.60/€ and the forward exchange rate, with
one-year maturity, is $1.58/€. Assume that an arbitrager can borrow
up to $2,750,000 or €1,718,750. If an astute trader finds an
arbitrage, what is the net profit in one year?
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An Italian currency dealer has good credit and can borrow
€937,500 for one year. The one-year interest...

The forward rate of the Swiss franc (SF) is $0.50. The spot rate
of the Swiss franc is $0.48. The following interest rates
exist:
U.S.
Switzerland
360-day borrowing rate
7%
5%
360-day deposit rate
6%
4%
Kriner Inc. needs to purchase SF200,000 in 360 days.
Determine the amount of U.S. dollars needed in 360 days if
Kriner Inc. uses a money market hedge.
Group of answer choices
$96,914
$101,904
$101,923
$92,307
$98,770

Neveready Flashlights Inc. needs $340,000 to take a cash
discount of 3/17, net 72. A banker will loan the money for 55 days
at an interest cost of $10,400.
a. What is the effective rate on the bank loan? (Use a 360-day
year. Do not round intermediate calculations. Input your answer as
a percent rounded to 2 decimal places.)
Effective rate of interest:
b. How much would it cost (in percentage terms) if the firm did
not take the cash...

16
Neveready Flashlights Inc. needs $345,000 to take a cash
discount of 3/13, net 73. A banker will loan the money for 60 days
at an interest cost of $12,300.
a. What is the effective rate on the bank loan?
(Use a 360-day year. Do not round intermediate
calculations. Input your answer as a percent rounded to 2 decimal
places.)
b. How much would it cost (in percentage terms) if
the firm did not take the cash discount but...

Neveready Flashlights, Inc. needs $410,000 to take a cash
discount of 2/10, net 60. A banker will loan the money for 50 days
at an interest cost of $6,600.
a.
What is the annual rate on the bank loan? (Use 365 days
in a year. Do not round intermediate calculations. Round the final
answer to 2 decimal places.)
Annual rate
%
b.
How much would it cost (in percentage terms) if the firm did not
take the cash discount,...

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...

Santa Clara Electronics, Inc. of California currently exports
1,000,000 electric switches per year to the Argentina under an
import agreement that expires in five years. In the Argentina, the
imported switches are currently sold for peso equivalent of $75 per
set. Santa Clara’s costs, including shipping, are $50 per set, and
its current pre-tax profit is $25 per set. Similar costs and prices
would occur in Argentine production. The market for this type of
switch in the Argentina is stable...

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