Dollars that boston will receive in one year

Assignment Help Financial Management
Reference no: EM131910373

Assume the Hong Kong dollar (HK$) value is tied to the U.S. dollar and will remain tied to the U.S. dollar. Assume that interest rate parity exists. Today, a euro (€) is worth $1.18 and HK$9.21. The one-year interest rate on euro is 8%, while the one-year interest rate on the U.S. dollar is 3%. You believe in the International Fisher effect. Boston company will receive €2 million in one year from selling products to Europe, and will convert these proceeds into Hong Kong dollars in the spot market at that time to purchase imports from Hong Kong. Estimate the amount of U.S. dollars that Boston will receive in one year when converting its € receivables into U.S. dollars. Forecast the amount of Hong Kong dollars that Boston will be able to purchase in the spot market one year from now with €2 million. (Hint: Since HK$ is pegged to USD, the value change between € and HK$ one year later is going to be exactly the same as that between USD and €

Reference no: EM131910373

Questions Cloud

What are the returns on funds invested for bill : What are the returns on funds invested for Bill and Erica respectively? P
The international fisher effect : Also assume that you believe in the International Fisher Effect. What is your expected spot rate of Argentine Peso in one year with respect to the U.S. dollar?
What is expected spot rate of british pound : What is your expected spot rate of the British pound in one year with respect to the Australian dollar?
How energy and materials flow in your local ecosystem : An overview of your selected issue. How energy and materials flow in your local ecosystem and how this is related to your selected issue.
Dollars that boston will receive in one year : Estimate the amount of U.S. dollars that Boston will receive in one year when converting its € receivables into U.S. dollars.
What activities lie on the critical path : Will the project as planned meet the October 25th deadline? Why, or why not? What schedule compression techniques would you use?
Describe the previous land use of the specific site : Describe the previous land use of the specific site and immediate surrounding areas, and the appropriateness of the development given the history
What is the implied interest rate for the treasury bond : What is the implied interest rate for the treasury bond? What would be the outcome if TS did not hedge its position?
Baggage-handling machines with newer and more efficient one : Air Links, a commuter airline company, is considering replacing one of its baggage-handling machines with a newer and more efficient one.

Reviews

Write a Review

Financial Management Questions & Answers

  Find a publicly traded company and find its annual report

Provide the name of the company you chose and describe something interesting you found in the MD&A. Again, do not duplicate firms, please.

  What value would whitehurst place on the ivanhoe stock

If Whitehurst requires a 12 percent rate of return on investments of this type, what value would Whitehurst place on the Ivanhoe stock?

  Company average balance in accounts payable

Calvani, Inc., has a cash cycle of 46.5 days, an operating cycle of 69 days, and an inventory period of 30 days. The company reported cost of goods sold in the amount of $348,000, and credit sales were $571,000. What is the company’s average balance ..

  How would you determine the value of this product

How would you determine the value of this product? What price do you think Compressor Controls should charge for this product?

  Yield to maturity and yield to call

What is the yield to call if they are called in 5 years? Which yield might investors expect to earn on these bonds? why?

  Influence the cash flow and risk of the project

Commodore Corporation is deciding whether it makes sense to invest in a project today, or to postpone this decision for one year. The investment timing option does not affect the expected cash flows and should therefore have no impact on the project’..

  Used to make capital budgeting decisions

There are several calculations that can be used to make capital budgeting decisions (e.g. NPV, IRR, Payback). If you were the CFO of a company, which model would you use in making your decision? Explain why you would use it and compare why it is bett..

  Company forecasts high growth prospects

The company forecasts high growth prospects and is managed by an experienced and ambitious team who are capable of turning their business plan into reality.

  Calculate the effective annual interest rate on trade credit

Legacy Enterprises received invoice from its supplier. The terms of credit were stated as 3/15 n45. Calculate the effective annual interest rate on trade credit

  Negotiated a new labor contract

Chester has negotiated a new labor contract for the next round that will affect the cost for their product Cute. Labor costs will go from $2.90 to $3.50 per unit. Assume all period and other variable costs remain the same. If Chester were to absorb t..

  What is the companys cost of equity

The Absolute Zero Co. just issued a dividend of $3.15 per share on its common stock. The company is expected to maintain a constant 6.5 percent growth rate in its dividends indefinitely. If the stock sells for $63 a share, what is the company’s cost ..

  What kind of compensation program

Bill Jobs has decided to start a computer company called CompU in Joplin. He knows that many MSSU students, who are now required to own and operate a personal computer, are having difficulty setting up their computers, If CompU is successful, what ki..

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