FIN 565 Homework Week 1 - 7 (Bundle)

1. Question: Percentage Depreciation Assume the spot rate of the British pound is $1.73. The expected spot rate 1 year from now is assumed to be $1.66. What percentage depreciation does this reflect? 2. Question: Inflation Effects on Exchange Rates Assume that the U.S. inflation rate becomes high r...

1. Question: Covered Interest Arbitrage Assume the following information: 2. Question: Interest Rate Parity Consider investors who invest in either U.S. or British one-year Treasury bills. Assume zero transaction costs and no taxes. a) If interest rate parity exists, then the return for U.S. inves...

1. Question: Sources of Supplies and Exposure to Exchange Rate Risk Laguna Co.(a U.S. firm) will be receiving 4 million British pounds in one year. It will need to make a payment of 3 million Polish zloty in one year. It has no other exchange rate risk at this time. However, it needs to buy supplies...

1. Question: Host Government Incentives for DFI Why would foreign governments provide MNCs with incentives to undertake DFI there? 2. Question: DFI Location Decision Decko Co. is a U.S. firm with a Chinese subsidiary that produces smart phones in China and sells them in Japan. This subsidiary pays ...

1. Question: Pricing a Foreign Target Alaska, Inc., would like to acquire Estoya Corp., which is located in Peru. In initial negotiations, Estoya has asked for a purchase price of 1 billion Peruvian new sol. If Alaska completes the purchase, it would keep Estoya’s operations for two years and then...

1. Question: Banker’s Acceptances a. Describe how foreign trade would be affected if banks did not providetrade- related services. b. How can a banker’s acceptance be beneficial to an exporter, an importer, anda bank? 2. Question: Letters of Credit Ocean Traders of North America is a firm bas...