End-of-Chapter 11 Problems

End-of-Chapter 11 Problems - Moore School of Business...

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1 Moore School of Business Spring 2012 University of South Carolina IBUS 401 – INTERNATIONAL FINANCIAL MANAGEMENT Answers to selected end-of-chapters problems Chapter 11 Managing Transaction Exposure Problems assigned: 1, 2, 3, 7, 10, 11, 12, 19, 27, 32, 33 1. The net exposure to Currency 1 is 120,000 units; the net exposure to Currency 2 is –140,000 units; the net exposure to Currency 3 is –150,000 units. 2. The firm could borrow the amount of Singapore dollars so that the 100,000 Singapore dollars to be received could be used to pay off the loan. This amounts to (100,000/1.02) = about S$98,039, which could be converted to about $49,020 and invested. The borrowing of Singapore dollars has offset the transaction exposure due to the future receivables in Singapore dollars. 3. If the firm deposited MXP186,916 (computed as MXP200,000/1.07) into a Mexican bank earning 7% over 6 months, the deposit would be worth 200,000 pesos at the end of the six-month period. This amount would then be used to take care of the net payables. To make
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