Exam 19: International Corporate Finance

Currency Exchange Compute the number of dollars that can be bought with 8 million of foreign currency units: $1 = 7.2501 South African rand

What is meant by hedging exchange rate risk and what are some ways it is done?

Currency Exchange Compute the amount of foreign currency that can be purchased for $750,000: 1 Israeli shekel = $0.2351

Which of the following is an economic principle that states all identical goods in different markets must have the same price?

Triangular Arbitrage Assume the U.S.dollar spot exchange rate with the Canadian dollar is $1 = CA$1.125.The U.S.dollar and Swiss Franc exchange rate is $1 = 1.235.If the cross rate between the franc and Canadian dollar is 1 franc = CA$0.9820,then show that an arbitrage is possible.What positions should be taken to profit from the mispricing?

Arbitrage profit can be made by:

Explain patterns of increased capital involvement firms might use to seek to expand business internationally.

Which of these is defined as the amount of domestic currency it takes to buy one unit of foreign currency?

Purchasing Power Parity 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?

When Starbucks opens a location in Mexico City,this is an example of:

Exchange Rate Quote Convert the following indirect quote to a dollar direct quote: $1 = 3.8249 Saudi Arabian riyal

Exchange Rate Risk A U.S.firm is expecting cash flows of 15 million Mexican pesos and 20 million Indian rupees.The current spot exchange rates are: $1 = 11.501 pesos and $1 = 45.525 rupees.If these cash flows are not received for one year and the expected spot rates at that time will be $1 = 11.265 pesos and $1 = 45.005 rupees,then what is the difference in dollars received that was caused by the delay?

If the spot rate between the U.S.dollar and the Brazilian real is $1 = 2.0895 real and the 3-month forward rate is $1 = 2.1725 real,is the forward real selling at a discount or a premium?

Exchange Rate Quote Convert the following direct quote to a dollar indirect quote: 1 Indian rupee = $0.02250

Explain how interest rates and inflation influence forward exchange rates and future spot rates.

A golf club costs $112 in the United States.The same club costs AU$78 in Australia.Assume that purchasing power parity holds.What is the exchange rate between the U.S.and Australian dollars?

Convert the following direct quote to dollar indirect quote: 1 Danish krone = $0.1991.

Purchasing Power Parity If the current spot rate between the U.S.dollar and the Netherland Antilles guilder was $1 = 1.54 guilder,and if the inflation rate in the United States was 2 percent and in the Netherland Antilles it was 8 percent,then what would be the expected spot rate in one year?

Cross Rate 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 U.S.firm is expecting to pay cash flows of 15 million Egyptian pounds and 25 million Qatar rials.The current spot exchange rates are: $1 = 5.25 pounds and $1 = 3.75 rials.If these cash flows are delayed one year and the expected spot rates at that time will be $1 = 5.62 pounds and $1 = 4.00 rials,then what is the difference in dollars paid that was caused by the delay?