Problem 5.2 Bloomberg Cross Rates
Use the following cross rate table from Bloomberg to answer the following questions. If you are not familiar with all of the 3-letter currency
codes, refer to the table inside the back cover of this text.
Chapter 1 Introduction to Corporate Finance
Questions from the required textbook at the end of Chapter 1
4. Would our goal of maximizing the value of the shares be different if we were
thinking about financial management in a foreign country? Why or why n
Problem 16.9 Lancaster Technology: Euro-based investors (B)
Using the same data but assuming an exchange rate which began at 1.4844/ in June 2004, and then consistently appreciated versus the euro 1.50%
per year for the entire period. Calculate the annual
Problem 16.8 Lancaster Technology: Euro-based investors (A)
Using the same data, calculate the annual average total return (including dividends) to a euro-based investor holding the shares for
the entire period shown. Assume an investment of 100,000.
Problem 16.4 Anglo-American Equity Fund
An investor is evaluating a two-asset portfolio of the following two securities.
a. If the two equity funds have a correlation of +.72, what is the expected risk and return for the following three portfolio
Problem 16.3 Baltic Returns
Assume the Australian dollar returns (monthly averages) shown below for three Baltic republics. Calculate the Sharpe and Treynor
measures of market performance.
Problem 16.1 Pacific Wietz
Katie Pittard is a European analyst and strategist for GMO, a New York-based mutual fund company. Katie is
currently evaluating the recent performance of shares in Pacific Wietz, a publicly traded specialty chemical
company in G
Problem 13.1 Uluru Oil Company
Uluru Oil Companys cost of debt is 7%. The risk-free rate of interest is 3%. The expected return
on the market portfolio is 8%. After depletion allowances, Uluru Oils effective tax rate is 25%.
Its optimal capital structure
Problem 15.2 Flatiron Group (USA)
The Flatiron Group, a private equity firm headquartered in Boulder, Colorado (US), borrows 5,000,000 for one year at
a. What is the dollar cost of this debt if the pound depreciates from $2.0625/ to $1.94
Problem 14.1 JPMorgan: Petrobras' WACC
JPMogan produced the following WACC calculation for Petrobras versus Lukoil of Russia
in their 18 June 2004, report. Evaluate the methodology and assumptions used in the
calculation. Assume a 28 % tax rate for both c
Transaction exposure. What are the four main types of transactions from which
transaction exposure arises?
Purchasing or selling on credit, goods or services when prices are stated in
Problem 10.1 Siam Cement
Siam Cement, the Bangkok-based cement manufacturer, suffered enormous losses with the coming of the
Asian crisis in 1997. The company had been pursuing a very aggressive growth strategy in the mid-1990s,
taking on massive quantiti
Problem 8.1 Andina, S.A.
Andina SA, a Chilean company, wishes to borrow US$8,000,000 for eight weeks.
A rate of 4.00% per annum is quoted by potential lenders in New York, Great
Britain, and Switzerland using, respectively, international, British, and the
Foreign Currency Derivatives
Options versus futures. Explain the difference between foreign currency options and
futures and when either might be most appropriately used.
An option is a contract giving the buyer the right but not th
Problem 7.1 Australian futures
Ian Smith, the currency speculator we met earlier in the chapter, sells eight June 2007 futures contracts for 800,000 Australian dollars at the
closing price quoted in Table 7.1 on page 202. Assume that the June settlement p
Problem 6.3 Argentine Peso and PPP
The Argentine peso was fixed through a currency board at Ps1.00/US$ throughout the 1990s. In
January 2002 the Argentine peso was floated. On January 29, 2003 it was trading at Ps3.20/US$.
During that one year period Arge
Foreign Exchange Rate Determination and Forecasting
Asset market approach to forecasting. Explain how the asset market approach can
be used to forecast future spot exchange rates. How does the asset market approach
differ from the BOP approac
Problems 9.8-9.10 Forecasting the Pan-Pacific Pyramid: Australia, Japan & The United States
Gross Domestic Product
Reference Book: Ross, S. A., Thomson, S. C., Christensen, M. J., Westerfield, R. W., and
Jordan, B. D. (2007). Fundamentals of Corporate Finance, 4th edition,
Introduction to corporate finance
Questions and Problems