Exam 19: International Corporate Finance

A U.S. firm is expecting cash flows of 5 million Mexican pesos and 10 million Indian rupees. The current spot exchange rates are: $1 =11.255 pesos and $1 = 44.864 rupees. If these cash flows are not received for one year and the expected spot rates at that time will be $1 = 10.080 pesos and $1 = 44.125 rupees, then what is the difference in dollars received that was caused by the delay?

The U.S. dollar spot exchange rate with the Australian dollar is $1 = AU$1.2219. The U.S. dollar and euro exchange rate is $1 = €0.7595. If the cross-rate between the euro and Australian dollar is €1 = AU$1.575 then show that an arbitrage is possible. What positions should be taken to profit from the mispricing?

Convert the following direct quote to a dollar indirect quote: 1 Israeli shekel = $0.2351

China's exchange rate is pegged to the:

Suppose exchange rates between the U.S. dollar and the Mexican peso is 12.90 peso = $1 and the exchange rate between the U.S. dollar and the euro is $1 = 0.90 euros. What is the cross-rate of the Mexican peso to the euro?

An exchange rate regime where the country's central bank allows its currency price to float freely between an upper and lower bound and may buy or sell large amounts of it in order to provide price support or resistance is referred to as:

Trade agreements are intended to:

If the current spot rate between the U.S. dollar and the Swedish krona was $1 = 7.5423 krona, and if the inflation rate in the United States was 5 percent and in Sweden it was 2 percent, then what would be the expected spot rate in one year?

Arbitrage profit can be made by:

Purchasing power parity (PPP) may not hold exactly because of which of the following?

If fewer dollars will buy a unit of foreign currency, then the dollar is:

Convert the following direct quote to a dollar indirect quote: 1 Korean won = $0.001045

Given these two exchange rates, $1 = 1.3254 Australian dollars and $1 = £0.5233, compute the cross rate between the Australian dollars and the pound. State this exchange rate in Australian dollars and in pounds.

A financial manager has determined that the appropriate discount rate for a foreign project is 12 percent. However, that discount rate applies in the United States using dollars. What discount rate should be used in the foreign country using the foreign currency? The inflation rates in the United States and in the foreign country are expected to be 3 percent and 10 percent, respectively.

Compute the amount of foreign currency that can be purchased for $1,300,000: 1 Thai baht = $0.03057

A large amount of foreign direct investment into a country will most likely result in:

A golf club costs $143 in the United States. The same club costs AU$100 in Australia. Assume that purchasing power parity holds. What is the exchange rate between the U.S. and Australian dollars?

If the price of silver in England is £6.25 per ounce, what is the expected price of silver in the United States if the spot exchange rate is $1 = £0.55?

Some political risks to the assets and cash flows of multinational corporations include:

Convert the following direct quote to a dollar indirect quote: 1 Thai baht = $0.03057