Mid-term Exam example International Finance

Mid-term Exam example International Finance - International...

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International Corporate Financial Management Mid-Term Exam Professor Ned Hill October 7, 2010 Name ______________________________________________ Problem 1______________ Problem 2 ______________ Problem 3 ______________ Problem 4 ______________ Total ______________ INSTRUCTIONS: You are allowed 80 minutes to complete the exam. Please show all your work. It’s difficult to give partial credit if I don’t see where you might have made a simple error —or a serious one. Problems are given equal weight unless otherwise indicated. If you feel you need to make an assumption that is not stated in the problem, please state the assumption you are making and then proceed. In the “soft answer” sections, points will be awarded on the basis of clarity of your answer, importance of factors you identify, and thoughtfulness of your response —not on the basis of quantity of words. Nevertheless, if you do need a little more space than I’ve provided, use the back of the sheets. Of course, the BYU Honor Code is in force. You agree not to provide assistance to another nor receive assistance from another during this exam (medical emergencies excepted!). If you have a question during the exam that is not covered by the “make an assumption” rule, please consult with our TA, Eli Trejo. I wish you all the best! What fun to be in the classroom with you! See you Tuesday. Ned Problem 1 Hedging Exchange Rates (25 points) International Financial Management Mid-term Page 1 of 6
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Your company expects to receive 250,000£ in mid-December when you complete delivery of a consulting engagement to a London-based client. You are considering hedging this transaction in case the $/£ exchange rate moves against you. You arm yourself with quotes from today’s market rates: Spot Exchange Rates: Bank AGBP/USD 1.5800 $/£ Bank B USD/JPY 83.3400¥/$ Bank C GBP/JPY 132.8200¥/£ Forward Rates quoted for GBP/USD (stated in $/£): 1 mo 1.57621 2 mo 1.57268 3 mo 1.56925 6mo 1.55849 Futures Contract for Dec 2010: contract size = 62,500£
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This note was uploaded on 04/22/2011 for the course BUS M 432 taught by Professor Nedhill during the Winter '11 term at BYU.

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Mid-term Exam example International Finance - International...

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