An  increase in the home country’s inflation rate relative t…

An  increase in the home country’s inflation rate relative to that of other countries would _________ the home country’s current account balance.  An increase in the value of the home country’s currency  would __________ the home country’s current account balance.

Tennessee Co. conducts business in the U.S. and Canada. The…

Tennessee Co. conducts business in the U.S. and Canada. The net cash flows from Canadian operations are expected to be C$500,000 next year. The Canadian dollar is valued at about $.90. The net cash flows from U.S. operations are supposed to be $200,000. To reduce sensitivity of its net cash flows without reducing its volume of business in Canada, Tennessee Co. could:

Money Corp. frequently uses a forward hedge to hedge its Mal…

Money Corp. frequently uses a forward hedge to hedge its Malaysian ringgit (MYR) receivables. For the next month, Money has identified its net exposure to the ringgit as being MYR1,500,000. The 30-day forward rate is $.23. Furthermore, Money’s financial center has indicated that the possible values of the Malaysian ringgit at the end of next month are $.20 and $.25, with probabilities of .30 and .70, respectively. Based on this information, the revenue from hedging minus the revenue from not hedging receivables is____.

The inflation rate in the U.S. is 3%, while the inflation ra…

The inflation rate in the U.S. is 3%, while the inflation rate in Japan is 10%. The current exchange rate for the Japanese yen (¥) is $0.0075. After supply and demand for the Japanese yen has adjusted in the manner suggested by purchasing power parity, the new exchange rate for the yen will be:

Assume that Kramer Co. will receive SF800,000 in 90 days. To…

Assume that Kramer Co. will receive SF800,000 in 90 days. Today’s spot rate of the Swiss franc is $.62, and the 90-day forward rate is $.645. Kramer has developed the following probability distribution for the spot rate in 90 days:  Possible Spot Rate   in 90 Days Probability $.61 10% $.63 20% $.64 40% $.65 30%  The probability that the forward hedge will result in more dollars received than not hedging is: