Foreign exchange trading in 2007 averaged about per

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Fundamentals of Financial Management
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Chapter 19 / Exercise 05
Fundamentals of Financial Management
Brigham
Expert Verified
16. Foreign exchange trading in 2007 averaged about _____________ per day. A) $101 million B) $3.20 trillion C) $101 billion D) $1.88 trillion E) $101 trillion Answer: B
Level: Easy 17. In 2007, the U.S. imported goods and services worth about _____________ and exported about _________ leading to a current account ____________. Level: Medium
18. A U.S. investor has borrowed pounds, converted them to dollars and invested the dollars in the U.S. to take advantage of interest rate differentials. To cover the currency risk the investor should
Ch 9 - 3
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Fundamentals of Financial Management
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Chapter 19 / Exercise 05
Fundamentals of Financial Management
Brigham
Expert Verified
4 th Ed B) Buy dollars forward C) Buy pounds forward D) Sell pounds spot E) None of the above Answer: C Level: Difficult 19. A U.S. bank borrowed dollars, converted them to euros and invested in euro denominated CDs to take advantage of interest rate differentials. To cover the currency risk the investor should Level: Difficult
20. A U.S. firm has £50 million in assets in Britain which they need to repatriate in 6 months. They could hedge the exchange rate risk by A) Buying pounds forward B) Selling pounds forward C) Borrowing pounds D) Both B and C would hedge the risk E) Both A and C would hedge the risk Answer: D
Level: Difficult 21. A U.S. firm has borrowed £50 million from a British firm. The borrower will need to convert dollars to pounds to repay the loan when it is due. The U.S. firm could hedge the exchange rate risk by
Level: Medium Ch 9 - 4
4 th Ed 22. A U.S. bank converted $1 million to Swiss francs to make a Swiss franc loan to a valued corporate customer when the exchange rate was 1.2 francs per dollar. The borrower agreed to repay the principle plus 5% interest in 1 year. The borrower repaid Swiss francs at loan maturity and when the loan was repaid the exchange rate was 1.3 francs per dollar. What was the bank's dollar rate of return?
Level: Difficult 23. A Swiss bank converted 1 million Swiss francs to euros to make a euro loan to a customer when the exchange rate was 1.85 francs per euro. The borrower agreed to repay the principle plus 3.75% interest in 1 year. The borrower repaid euros at loan maturity and when the loan was repaid the exchange rate was 1.98 francs per dollar. What was the bank's franc rate of return?
Level: Difficult

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