Review Problems B - BUS 631 International Finance and...

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BUS 631 International Finance and Banking Review Problems B 1. Informatics, Inc., a U.S.-based MNC, imports some components from a Japanese supplier. John Smith, Informatics’ treasurer, now needs to hedge a payment of JPY80,000,000 to the Japanese supplier. He has obtained the following quotes from Chasebank: Spot rate: USD0.0128/JPY Six-month forward rate: USD0.0132/JPY Six-month Japanese interest rate: 0.25% p.a. Six-month U.S. interest rate: 4.00% p.a. Six-month call option at strike price USD0.0130/JPY: USD0.00037/JPY Six-month put option at strike price USD0.0130/JPY: USD0.00028/JPY What are the costs of each alternative (unhedged, forward market hedge, money market hedge, and options market hedge)?
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2. Spartan Inc., a U.S.-based manufacturer of high-quality tennis rackets, has recently considered the development of a subsidiary in Switzerland that could manufacture and sell tennis rackets locally. All relevant information follows. * An estimated CHF20,000,000, which includes funds to support working
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Review Problems B - BUS 631 International Finance and...

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