Exam 19: International Business Finance

A dealer in London posts an ask rate of .6238 and a bid rate of .6237.How much,in U.K.pounds,would it cost to purchase $100,000.For how much in pounds could you sell $100,000?

Transactions carried out in the foreign exchange markets include

The difference between the asked price and the bid price is known as the spread.

According to the domestic Fisher effect,if the inflation rate is 3% and the real rate of interest is 2%,the nominal rate of interest will be

Participants in foreign exchange trading include

The international currency system that presently exists is best described as a ________ rate currency system.

The relevant sources of risk for direct foreign investment capital budgeting decisions are the same as those faced when making domestic capital budgeting decisions.

Foreign exchange transactions carried out in the spot market entails an agreement today to deliver a specific number of units of currency on a future date in return for a specified number of units of another currency.

Some complexities of conducting international business include

Spot exchange markets are efficient due to arbitrage forces.

Use the following information to answer the following question(s). Below is an excerpt from Table 19.1,Foreign Exchange Rates (December 26,2012)that appears in your text.(Sources The Wall Street Journal,Reuters) Country/Currency In US$ Per US$ India (Rupee).01818 55.0155 Britain (Pound)1.6133 .6198 1-mos forward 1.6133 .6198 3-mos forward 1.6130 .6200 6-mos forward 1.6128 .6200 Canada (Dollar)1.0074 .9927 Switzerland franc 1.0917 .9160 1-mos forward 1.0928 .9151 3-mos forward 1.0939 .9141 6-mos forward 1.0961 .9123 -The number of pounds you can purchase per U.S.dollar is

An investor purchased 20,000,000 Japanese yen at an exchange rate of 101.31 yen to the dollar.The yen cost her ________.Round answer to the nearest dollar.

Suppose International Trading Enterprises purchased 25,000 kilograms of Belgian chocolate for a price of 100,000 euros.If the current exchange rate is .77000 euros to the U.S.dollar,what is the purchase price of the chocolate in dollars?

One U.S.dollar buys 12.9923 Mexican pesos and .7585 euros.What is the peso/euro exchange rate.

Assume that an importer of wine were to purchase 5,000 cases of premium French Bordeaux for 700,000 euros.Further assume that the quoted exchange rates are as follows: spot rate = .770 euros to the U.S.dollar;30-day forward rate = .775 euros to the U.S.dollar;and 90-day forward rate = .778 euros to the U.S.dollar.If the actual currency exchange rate at the time payment is due in 90 days is equal to the forward rate of .778 euros to the U.S.dollar,how much would the wine cost the importer in U.S.dollars if payment is made in 90 days? Round to the nearest dollar.

Exchange rate risk

A cross rate is the computation of an exchange rate for a currency from the exchange rates of two other countries.

A barrel of oil currently costs $85 in U.S.dollars.The current exchange rate is $1.32 U.S.to the euro.If purchasing power parity prevails what is the price of a barrel of oil in euros?

The following are the prices in the foreign exchange market between the U.S.dollar and a foreign currency (fc).Spot 0.6335US$/fc;three-month forward 0.6375US$/fc.What was the discount or premium on three-month forward for the foreign currency?

Briefly discuss the factors that multinational firms consider in arriving at capital structure decisions.