Blog

You are the treasurer of Montana Corporation and must decide how to hedge (if at all) future payables of 1,000,000 Japanese yen 90 days from now. Call options are available with a premium of $.01 per unit and an exercise price of $.01033 per Japanese yen. The forecasted spot rate of the Japanese yen in 90 days is:  Future Spot Rate Probability $.01035 20% $.01032 20% $.01030 30% $.01029 30%  The 90-day forward rate of the Japanese yen is $.01033.  What is the probability that the call option will be exercised (assuming Montana purchased it)?

If you dissolve 22.30 g of Na2CO3(s) (molar mass = 105.99 g/mol) in enough water to give a 500.0 mL solution, what is the molarity?

Whitewater Co. is a U.S. company with sales to Canada amounting to C$8 million. Its cost of materials attributable to the purchase of Canadian goods is C$6 million. Its interest expense on Canadian loans is C$4 million. Given these exact figures above, the dollar value of Whitewater’s “earnings before interest and taxes” would ____ if the Canadian dollar appreciates; the dollar value of Whitewater’s cash flows would ____ if the Canadian dollar appreciates.

Jensen Co. expects to pay €50,000 in one month for its imports from France. It also expects to receive €200,000 for its exports to Belgium in one month. Jensen estimates the standard deviation of monthly percentage changes of the euro to be 2.5 percent over the last 50 months. Assume that these percentage changes are normally distributed. Using the value-at-risk (VAR) method based on a 95% confidence level, what is the maximum one month loss in dollars if the expected percentage change of the euro during next month is -1%? Assume that current spot rate of the euro (before considering the maximum one-month loss) is $1.35.

Magent Co. is a U.S. company that has exposure to the Swiss francs (SF) and Danish kroner (DK). It has net inflows of SF200 million and net outflows of DK500 million. The present exchange rate of the SF is about $.40 while the present exchange rate of the DK is $.10. Magent Co. has not hedged these positions. The SF and DK are highly correlated in their movements against the dollar. If the dollar strengthens, then Magent Co. will:

A purely domestic firm is never exposed to exchange rate fluctuations.

The Fed’s indirect method of intervention is to trade dollars for or against other currencies.

Which statements are true? A triple bond is consists of two σ-bonds and one π-bond A double bond consists of one σ-bond and one π-bond A Single bond consist of one σ-bond

American Bank quotes a bid rate of $0.026 and an ask rate of $0.028 for the Indian rupee (INR); National Bank quotes a bid rate of $0.024 and an ask rate for $0.025. Locational arbitrage would involve:

  U.S. Jordan 360-day borrowing rate 6% 5% 360-day deposit rate 5% 4% Perkins Corp. will receive 250,000 Jordanian dinar (JOD) in 360 days. The current spot rate of the dinar is $1.48, while the 360-day forward rate is $1.50. How much will Perkins receive in 360 days from implementing a money market hedge (assume any receipts before the date of the receivable are invested)?