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F494 Ouiz One / Summer 15 I
for!) question wort/t 3' points / Please use the ,am VideoJ'IA/V sheer/ iau may keep your copy ofrhe quiz questions
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Gl-ll, Inc. is considering several international opportunities that
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Each question worth 3 points 1/ Please use the provided SCAN sheet [You may keep your copy of the quiz questions
Use the fol/a wring data to answer questions I 3
- Todays Date: Feb 1, 2015
- Exercise Price for 6 month Call 8. Put Options
1
QUIZ 3
INTRODUCTION TO RIA CHECKPOINT
Learning Objectives
At the end of this assignment, you will be able to
Describe RIA Checkpoint (RIAs Internet-based tax service)
Sign on and use RIA Checkpoint to do tax research
Recognize the different types of
F494 Discussion Questions- #3
International Arbitrage-Spring 2017
Locational Arbitrage:
1) Madura, Chapter 7
# 2; Blades Case
#2) Assume Two banks quote the following:
Bid
Ask
Beal Bank
$0.401/NZ
$0.404/NZ
Yardley Bank
$0.398/NZ
$0.400/NZ
Is locational ar
F494
International Financial
Management
Week11
Finish Managing Economic Exposure;
International Investment
Finish:
Problems with Hedging to Manage Long-term
Long-Term Hedging of Foreign Payables
exposure:
when the Foreign Currency is Appreciating
Spot Rat
INTERNATIONAL FINANCIAL MANAGEMENT
Finance 494
Spring 2012
Classroom BS2003
TTh 10:30am-11:45am
after
Professor Catherine Bonser-Neal
Office: 4054
Phone:274-3448
email: [email protected]
Office Hours: TTh 9:30-10:15am, generally right
class, and by appointm
F494
International Financial
Management
Weeks 8 & 9: Finish Managing
Transaction Exposure;
Managing Economic Exposure
So far weve seen two ways to manage
transaction exposure:
I. Forward Hedge
II. Money Market Hedge
Next we examine how futures & options a
F494
International Financial
Management
Week 1: Overview of International
Flows; Introduction to Foreign
Exchange Markets
I. Managing for Value: what to keep in
mind
Like domestic projects, foreign projects involve an
investment decision and a financing d
2. Fundamentals of the Credit Market
A. Introduction: intertemporal exchange
Credit market transactions (borrowing, lending and related transactions) occur because economic
agents often need to conduct intertemporal exchanges. The word intertemporal means
F494 Discussion Problem Set 2Spring 2017
Exchange Rate Determination
1) Questions in Madura, Ch.4
#2. Assume that the U.S. inflation rate becomes high relative to Canadian inflation. Other
things being equal, how should this affect the (a) U.S. demand for
F494
International Financial
Management
Week 3: Finish Week 2 notes (on China
& the Euro); Begin International
Arbitrage
International Arbitrage
International Arbitrage occurs when exchange
rates and/or interest rates are such that riskless
profit opportu
F494
International Financial
Management
Week 3: Finish Week 2 notes (on China
& the Euro); Begin International
Arbitrage
International Arbitrage
International Arbitrage occurs when exchange
rates and/or interest rates are such that riskless
profit opportu
E305
Steve Russell
Spring 2011
Solutions for the Fifth Assignment
1. Calculate the following seven items for each of the single payment securities described
below:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
the actual secondary market price
the anticipated price
the amo
CURRENCY STRADDLE
Option
Premium
Strike Price
CALL
$0.025
$1.10
PUT
$0.017
$1.10
PAYOFF PROFILE
USD/EUR SPOT
Exercise Call
Exercise Put
Payoff From Call
Payoff from Put
Premium Paid
NET POSITION
$0.90
N
Y
$0.000
$0.20
-0.042
$0.242
$0.95
N
Y
$0.000
$0.15
F494 Fun Facts
THE
IDEAL
CURRENC
F494 Fun Facts
F494 Fun Facts
THE
IMPOSSIBLE
TRINITY
F494 Fun Facts
Protect
Exports!
INA
CH
Control
bond yields
F494 Fun Facts
US
No growth
stimulus
Reserve
currency
F494 Fun Facts
PROTECT
EXPORTS
GE
RM
AN
Y
DEEP
CAPITAL
M
Exchange Rate
Determination
General Principles
The exchange rate is simply the price of one currency
in terms of another
It is largely determined by traditional forces of Supply
and Demand
Supply of
FX
Direct
Quote
$ / FX
Demand
for FX
Quantity of
FX
1
ST
F494
INTERNATIONAL FLOW OF
FUNDS
CAPITAL &
FINANCIA
ACCOUNT
CURRENT
ACCOUNT
1
BALANCE OF PAYMENTS (BOP)
IDENTITY
X = Exports / M = Imports / Ki = Capital Inflows / K o =
Capital Outflows
X + Ki = M + Ko
(Credits = Debits)
Rearranging:
X M = Ko Ki
Current
Option Features
Type
Expriation
Premium
Exercise Price
C
Call
One Year
$0.02
$0.74
$0.05
$0.04
$0.03
$0.02
$0.01
$0.00
$0.70
-$0.01
$0.72
-$0.02
-$0.03
Payoff Profile
Spot at Exercise Da
Exercise?
Proceeds
Cost
Premium
Net
Note Breakeven Point
$0.70
N
$0.
Option
1
2
E
0.55
0.58
Premium
0.02
0.005
USD / AWG
Exercise Option 1
Counterpary Exercise Option 2
Buy Option 1
Write Option 1
Per Unit Cost
Per Unit Proceeds From Counterparty
Per Unit Cost to meet demands of Counterpar
Net Cost to Obtain AWG
Undeged Co
SOP Basics quiz
Name:_
1. With regard to demand and supply, the primary objective of SOP is to achieve _?
2. How does SOP address the issues of volume and mix?
3. The SOP will state output in terms of _
while the MPS will state output in terms of _?
4. Th
F494
Purchasing Power Parity
P
P
P
Example 1
In United States a hammer costs $5
In Canada a hammer costs C$4
If exchange rate is $5/C$4 = $1.25/C$,
then:
$5 will buy you a hammer in the US.
Or you could trade your $5 for ($5)
(C$1/$1.25) = C$4 which wil
F494
Hedging Transaction
Exposure
Transaction Exposure
The sensitivity of the firms contractual transactions to
changes in exchange rates
Hedging Payables
The firm is attempting to protect itself from appreciation of
the currency in which is payables are
F494 / MONEY MARKET HEDGING / EXAMPLES
Page 376
#2
1. Borrow SGD100,000 / 1.02 = SGD 98,039.22 for 90
days
2. Exchange at the Spot Price for (SGD 98,039.22)
(USD.50/SGD) = USD 49,019.61
3. When the SGD 100,000 Receivables are received use
them to pay off
Need a hint on how to approach a SOP problem (like problem sets 3 and 4, and the problem in the set of
sample exam questions)?
Take a look at the problem set 4 solution-discussion.
Calculate the target inventory range for each month. See rows 19 and 20.
A
1.
Compare numerous methods of hedging payables and compare to unhedged case. Also refer to #3 part B
Visor Inc. (a US firm), has agreed to purchase supplies from Argentina and will need 1M Argentine pesos in 1 year. Interest rate parity presently
exists.
Determine the USD cash flows of a US-based company given a time series of exchange rates. Answer 3 related multiple-choice questions.
Biloxi Co. in China reinvests half net CF into operations and half to parent. Has CF from domestic of 10M and 100M of Chi
1-3:
4-6: Baltimore Co. considers divesting its six foreign projects as of today. Each project will last one year. Its required rate of return on each project is the same.
The cost of operations for each project is denominated in dollars and is the same.
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