exam 2 page 2

exam 2 page 2 - in exchangerates % (d) ex post and ex ante...

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4. The link between the home currency varue of a firm's assets and n L,. % luctua[lons rs: ligb:ll!-tjgq "and excl]?.nge rate i I -'\ (a) Asset exposure (b) Operating exposure /-6ffi-a;dTh, \*-J4 ,ftofo"e of the above t\ ,/ Sk6e interest rate in the U.S. is ig : B percent for the next year and interest rate in the U.K. is {-a) The pound is expected to depreciate against the dollar by about 1.6 percent. ,,,'" (b) The pound is expected to appreciate against the dollar by about 3 percent. t- he dollar is expected tq =!ptu"r?te against the pound by about B The pound is expected not to apreciate or depreciate at all. (d) (a) thl :glgljrlty of-realized domestic currency Yllrglgf the firm,'s--qoltmglualcash :ggs4 de- /#lna! ed i n- foreign *qurrencies t o "l.*p-e9!e--d lI9LTgi i?!: ggff Wch the presqgl:,algg of *h" S@; qe9r9g_0, i*@. (c) the potential that the firm's consolidated financial statement.ca4 be affected by changes
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Unformatted text preview: in exchangerates % (d) ex post and ex ante currency exposures )41 7. Consider a U.S.-based MNC with a Jvholly-owned ltaliaq "WgirrLFollowing a depreciation of t h e d o 1 ] a r a g a i n s t t h e e u r o , w h i c h o r t o f t h e d . e p r e c i a -tion? (u) Th". cash flow l}eulg-:ggd be.a.lt-glq-4 due to a***llemligs in the firm's5pmp.gilirs.Dgsition ! a-\n the marketplace. ' / \ k (b) I glygl-gperalinc cjfb-flsly io gglg will be translated to a higher U.S. dottar cash flow. lw/^ r f i.*-%_s,. {e) Answers a) and b) (d) None of the above 8. Based on the following market information for US and Canada, calculate the one-year interest . rare ror Cil"da;1p.". *"urm per annumJ \*:---__--JJ 6.@e refers to: Expected inflation rate Canada US 5.00% p.a. 3.00% p.a. ??? 1.00% p.a. ^o, ,F i +.Db \r -*b Tcg = brf' . j t ' ) i J f i ' f / I f 9 J's : . - l t_rlh,-i:$...
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This note was uploaded on 04/03/2012 for the course BUS 428 taught by Professor Xu during the Spring '11 term at Rhode Island.

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