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Please show all workings   Question 1 Explain how appreciation of...

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Please show all workings   Question 1 Explain how appreciation of...

Please show all workings

 

Question 1

Explain how appreciation of a home country's currency will impact an importer's cash flows? 

Question 2

On what factors is the effective yield of investing in a foreign currency dependent. 

 a.interest rate; amount invested
 b.income level; interest rates
 c.interest rate; exchange rate movements
 d.inflation rate; exchange rate movements

Question 3

 

ABC Company will require 100,000 Australian dollars in 90 days. A 90-day call option that has an exercise price of $0.75 with a premium of $0.01 is available. Assuming the spot rate in 90 days is $0.70, then 

 

a)    Will the option be exercised?
b)    What will be the net amount paid by ABC Company?

 

Question 4

 

ABC Company is considering investment in a single foreign currency. The CFO advises that this might be a rather risky policy. How do you think that ABC might lower its currency investment risk?

 

Question 5

 

Company CYZ, a US Company has two subsidiaries. The first subsidiary has net inflows in Canadian dollars of C$40,000, and the second subsidiary has net outflows in Canadian dollars of C$60,000. Calculate the net outflow or inflow in US dollars if the expected exchange rate of the Canadian dollar is US$0.75.

 

 

Question 6

 

A Canadian company is more likely to acquire an international firm if it anticipates an _____ of the foreign currency against the Canadian currency, and if its cost of capital is _______

 a.appreciation, high
 b.appreciation, low
 c.depreciation, high
 d.depreciation, low

 

Question 7

 

ABC Company, a Canadian firm, has a subsidiary in Switzerland. What will happen to ABC's cashflows if the Swiss franc appreciates against the Canadian dollar?

 

 

Question 8

 

XYZ Company will receive 500,000 New Zealand dollars in 180 days. A 180-day put option that has an exercise price of $0.65 with a premium of $0.02 is available. Assuming the spot rate in 180 days is $0.68, then 

 

a)    Will the option be exercised?
b)    What will be the net amount received by XYZ Company?

 

Question 9

 

Explain how a project's NPV is impacted by the depreciation expense in a given year. 

 

 

Question 10

 

A Canadian investor puts money into an Australian investment that offers an interest rate of 3% for six months. The Australian dollar appreciates by 4% over this period of six months. What is the effective yield on the Australian investment for the Canadian investor? 

 

 

Question 11

 

When is a put option "out of the money"?

 

 

Question 12

 

A speculator is planning on purchasing a put option on Canadian dollars. In what circumstances should a speculator purchase this type of option?

 

 

Question 13

 

ABC Company, a Canadian MNC, is considering an investment opportunity for a two-year project in Australia. The expected cashflows of the project are AUD 2,000,000 (Australian dollars) in Year One and AUD 3,000,000 in Year Two. The initial investment required is CAD 2,500,000 (Canadian dollars). ABC Company's cost of capital is 15% for this project. Calculate the net present value (NPV) of this project assuming that the exchange rate is expected to be AUD 1 = CAD 0.90 at the end of Year 1, and AUD 1 = CAD 0.92 at the end of Year 2

 

 

Question 14

 

Suppose your firm in Canada will be receiving AUD 500,000 in 90 days, and the 90-day forward rate for the Australian dollar is $0.92. What is the amount that the firm will receive if it uses a forward hedge?

 

 

Question 15

Suppose a Canadian MNC has a Mexican subsidiary that remits funds to Canada. Now if the Mexican peso _________, then the Canadian dollar amount of the funds that are remitted __________.   

 a.depreciates; is not affected
 b.appreciates; decreases
 c.appreciates; is not affected
 d.depreciates; is not affected and appreciates
 e.depreciates; decreases

 

 

 

 

 

 

 

 

 

 

 

Answer & Explanation

Solved by verified expert
Answered by KidEel2679 on coursehero.com

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Step-by-step explanation

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