Module11Tutorial - October 2003 FIN2101 BUSINESS FINANCE II...

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October 2003 FIN2101 BUSINESS FINANCE II MODULE 11 - INTERNATIONAL FINANCIAL MANAGEMENT QUESTION 1 What is FOREIGN EXCHANGE? What is an EXCHANGE RATE? What is the FOREIGN EXCHANGE MARKET? QUESTION 2 An Australian newspaper displays the following information: ------------ RETAIL MARKET ------------ buy/sell AUD 1= USD 0.5461/0.5421 a) Is this a DIRECT or an INDIRECT quote? b) What is the relationship between a direct and an indirect quote? c) Is the AUD usually quoted directly or indirectly? d) Explain what the spread represents. e) How much is the spread? QUESTION 3 a) If one AUD = USD0.5720, what is the value of one USD? b) If one ¥ = NZD 3.2100, what is the value of one NZD? c) If one MYR = SAR0.0057, what is the value of one SAR? d) If one CAD = AUD 1.0002, what is the value of one AUD? QUESTION 4 Define a SPOT transaction. Define a FORWARD transaction. QUESTION 5 Using the information in Question 2: a) If I wanted to buy AUD 1 million, how much USD would I sell? b) If I wanted to buy USD 50 million, how much AUD would I sell?
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October 2003 QUESTION 6 You observe the following information on exchange rates: AUD 1 = ¥ 86.73/85.00 a) If I wanted to buy ¥ 100 million, how much AUD would I sell? b) If I wanted to buy AUD 5 million, how much ¥ would I sell? QUESTION 7 The bank gives you the following quote: Spot AUD / USD 0.5240-50 3 month 12-16 6 month 20-17 a) What is the SPOT SPREAD? b) What are the 3 and 6 month OUTRIGHT FORWARD RATES? c) How does the outright forward rate differ from the forward rate? d) Is the AUD at a PREMIUM or DISCOUNT in the: - 3 mnth forward market? - 6 mnth forward market? e) You are an Australian exporter expecting USD 1 million in 3 months time. Minimise your foreign exchange risk. f)
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This note was uploaded on 12/06/2011 for the course BUSINESS Finance taught by Professor Qilei during the Summer '11 term at Tianjin University.

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Module11Tutorial - October 2003 FIN2101 BUSINESS FINANCE II...

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