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Determine interest arbitrage opportunity

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Reference no: EM133306295

1. Prospect that Multinational Corporation (MNC) obtain from the global existence.

2. Values of currencies with low inflation.

3. Translation exposure and transaction exposure with foreign exchange risk.

4. Calculate cost of issuing common stock and the weighted average cost of capital.

5. Determine interest arbitrage opportunity.

-Does disparity exist? Please show details calculation.

-Please refer to the lecture recording under week 4.

6. Find ask rate and bid rate as well as calculate bid and ask spread. (Chapter 2-The Foreign Exchange Market)

-Please refer to the formula from textbook / PowerPoint slide.

7. Calculate forward outright rate and the annualized premium / discount. (Chapter 2-The Foreign Exchange Market)

-Please refer to the formula from textbook / PowerPoint slide.

8. Based on a given scenario question, predict the price. (Chapter 2-The Foreign Exchange Market)

-Use cross-rate formula and provide opinion with pertinent justifications.

9. Determine transaction exposure: Forward hedging and money market hedging. Then you are required to select the optimal hedging strategy and provide justification. (Chapter 6-Foreign Currency Risk Management: Transaction, Operating and Translation Exposure)

-Please refer to the PowerPoint slides and tutorial question.

10. Based on the given scenario question, discover which currency loan is better option and justify your answer. (Chapter 2-The Foreign Exchange Market)

-Please do a further reading (application question).

11. Determine exchange rate. (Chapter 2-The Foreign Exchange Market)

-Please refer to the PowerPoint slides and tutorial question.

12. Based on a given scenario question. ascertain which country would investors invest. Support your answer with computation. (Chapter 3-International Parity Conditions)

-Hint: Apply International Fisher Effect (IFE) condition

-Explain the notion of the theory

-Formula:

-International Fisher Effect Theory:

(1+1c) / (1+ric) = el/eo

Where:

The = Interest rate of home country

If. = Interest rate of foreign country

et = Future spot rate of foreign currencies in home countries

e0 = Spot rate of foreign currencies in home currencies

†= Period of time

Based on the scenario question, you need to calculate NPV based on three different situations. (Chapter 10-International Capital Budgeting)

-You are required to construct the table and show details working. Please justify your answer.

Based on the scenario question, determine the calculated forward buying contract. (Chapter 4-Foreign Exchange Derivative)

-Please do a further reading (application question).

Reference no: EM133306295

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