Current bid-ask spot rates

Assignment Help Financial Management
Reference no: EM133227638

Tony Montana wants sell his firm (in USD), with no risk. He has one offer of JPY 100 Billion from a Japanese consortium, and another for GBP 700MM from a London group. Both offers will pay half immediately, and half in one year.

Current bid-ask spot rates are 90-91 JPY/USD, and 1.5-1.6 USD/GBP.

The U.S. interest rates for lending and borrowing are 9%-10%. The JPY rates are 1%-2%, and the GBP rates are 19%-20%.

Evaluate the offers. Which offer should Tony accept? Why? What should be done about hedging ?

Reference no: EM133227638

Questions Cloud

Economy and business environment : Internal factors that affect a company's share price include the economy and the business environment.
Investment account at end of every month : Say you invest $2,000 in an investment account at the end of every month for the next 30 years.
What are dual-currency bonds : Briefly discuss the factors that might motivate a company to source debt internationally. What are dual-currency bonds?
What about hedging financial management : Evaluate the offers. Which offer should Katie accept? Why? What about hedging financial management.
Current bid-ask spot rates : Current bid-ask spot rates are 90-91 JPY/USD, and 1.5-1.6 USD/GBP. Evaluate the offers. Which offer should Tony accept? Why? What should be done about hedging ?
Cyberdyne systems borrowed in domestic currency : Assume that Cyberdyne Systems borrowed in their domestic currency in order to fund the option premiums.
How high can bhp price increase before you get margin call : How high can BHP's price increase before you get a margin call? calculate the additional margin you need to deposit in the account
Foreign demand for the country exports increases : Explain the effect of each of the following on the FE curve. Foreign demand for the country's exports increases. The foreign interest rate increases.
What is the percentage change in your salary : Last year you made $35,000. If this year you make $38,000, what is the percentage change in your salary?

Reviews

Write a Review

Financial Management Questions & Answers

  Strategic direction-performance of organization is termed

The relationship among stakeholders used to determine and control the strategic direction and performance of an organization is termed:

  What is the value of the original assets

Prior to the expansion, what is the value of the original assets? Equity? Find the stock price.

  Quick ratios to find the state of company liquidity

You can make an inference from the ratios. For example, you can calculate the current and quick ratios to find the state of a company's liquidity.

  What is the difference between accrual and deferral

What is the purpose of adjusting entries? What is the difference between accrual and deferral? What is the reason for using accrual basis accounting?

  What is the required rate of return on bs stock

Stock A's stock has a beta of 1.30, and its required return is 12.00%. Stock B's beta is 0.80. If the risk-free rate is 3.50%, what is the required rate of return on B's stock?

  New process machine for the firm manufacturing facility

The A.M.I. Company is considering installing a new process machine for the firm's manufacturing facility.

  Why financial analysts use cash flows prediction

Why financial analysts use cash flows prediction instead of accounting earnings prediction in estimating the NPV of a project?

  What is the expected return on a portfolio

What is the expected return on a portfolio that is equally invested in the two assets?

  Which of these indicates that firm is efficient

When a firm's long-term debt-equity ratio is .98, the firm: If a firm's total debt ratio is greater than .5, then: Which of the following actions could improve a firm's current ratio if it is now less than 1.0? What is the residual income for a firm ..

  What is the implied one-year forward rate

Suppose the current spot rate is 1.59 $/£, the 1-year Europound rate is 2.01%, What is the implied 1-year forward rate?

  What is price of the bond

A bond with 25 years until maturity has a coupon rate of 7.2 percent and a yield to maturity of 6 percent. What is the price of the bond?

  Company plans to buy insurance to cover

The company plans to buy insurance to cover such a loss. Given its WACC of 13%, what will be the maximum premium?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd