Author: Anonymous

According to the IFE, if British interest rates exceed U.S. interest rates:

A problem for equity contracts is a particular type of ________ called the ________ problem.

An MNC can avoid translation exposure if its earnings are not remitted by the foreign subsidiary to the parent.

Why are debt contracts typically extremely complicated legal documents that place substantial restrictions on the behavior of the borrower?

Assume the following information:     Quoted Bid Price Quoted Ask Price Value of an Australian dollar (A$) in $ $0.67 $0.69 Value of Mexican peso in $ $.074 $.077 Value of an Australian dollar in        Mexican pesos     8.2     8.5   Assume you have $100,000 to conduct triangular arbitrage. What will be your profit from implementing this strategy?

Long-term forward contracts are a possible way to hedge the distant sale of fixed assets in foreign countries, but they may not be available for many emerging market currencies.

Most MNCs do not perceive their foreign exchange management as a profit center. Rather, their main responsibility is to assess potential exposure and determine how and if the exposure should be hedged.

Assume that Parker Company will receive SF200,000 in 360 days. Assume the following interest rates:    U.S. Switzerland 360-day borrowing rate 7% 5% 360-day deposit rate 6% 4% Assume the forward rate of the Swiss franc is $.50 and the spot rate of the Swiss franc is $.48. If Parker Company uses a money market hedge, it will receive ____ in 360 days. 

Assume the following information:   U.S. investors have $1,000,000 to invest: 1-year deposit rate offered on U.S. dollars = 12% 1-year deposit rate offered on Singapore dollars = 10% 1-year forward rate of Singapore dollars = $.412 Spot rate of Singapore dollar = $.400   Given this information:

A U.S. firm is bidding for a project needed by the Swiss government. The firm will not know if the bid is accepted until three months from now. The firm will need dollars to cover expenses but will be paid by the Swiss government in Swiss francs if it is hired for the project. The firm can best insulate itself against exchange rate exposure by: