mid1-key - Exam 1 BUS 428: Multinational Financial...

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Exam 1 BUS 428: Multinational Financial Management Spring, 2012 Name: Instructions: All questions are multiple choice questions. There are 15 questions in total. Using a No.2 pencil, choose the best (or most accurate) answer for each question. When you need to change your answers, erase previous answers completely. You are allowed to use a calculator. Computer is not allowed. Good luck! 1. The AUD/$ spot exchange rate is AUD1.60/$ and the SF/$ is SF1.25/$. The AUD/SF cross exchange rate is: (a) 0.7813 (b) 2.0000 (c) 1.2800 X (d) 0.3500 AUD1 . 60 / $ SF1 . 25 / $ = 1 . 28 2. The Singapore dollar-U.S. dollar (S$/$) spot exchange rate is S$1.60/$, the Canadian dollar-U.S. dollar (CD/$) spot rate is CD1.33/$ and the Singapore dollar-Canadian dollar (S$/CD) spot rate is S$1.15/CD. Determine the triangular arbitrage profit that is possible if you have $1,000,000. (a) $44,063 profit (b) $46,093 loss (c) No profit is possible (d) $46,093 profit X $1 M × [( S $1 . 60 / $ ÷ CD 1 . 33 / $ ÷ S $ /CD 1 . 15) - 1] = $46 , 093 or since 1 . 60 1 . 33 = 1 . 20 > 1 . 15 let us get S$ in order to buy CD at 1.15 later to sell at 1.20. $1M × S $1 . 60 / $ S $1 . 6M S $1 . 6M ÷ S $ /CD 1 . 15 CD 1 . 3913M CD 1 . 3913M ÷ CD 1 . 33 / $ $1 . 0461M $1 . 0461M - $1M = $46 , 093 1
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3. The forward market (a) Involves contracting today for the future purchase or sale of foreign exchange at the spot rate that will prevail at the maturity of the contract. (b) Involves contracting today for the future purchase or sale of foreign exchange at a price agreed upon today. X (c) Involves contracting today for the right but not obligation to the future purchase or sale of foreign exchange at a price agreed upon today. (d) None of the above 4. Suppose the spot rate and forward rate for the British pound are $1.4248 and $1.4179 respectively. Assume the forward pound is selling at a 1.94% annualized discount, what is the number of days
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mid1-key - Exam 1 BUS 428: Multinational Financial...

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