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A US exporter will receive 30 million Norwegian kroner (NOK) in 3 months and wishes to hedge the US dollar (USD)-NOK exchange rate. Assume that there is no active forward market in NOK. Therefore, the company decides to hedge using a forward contract on a foreign currency whose price changes are highly correlated with those of NOK. It decides to use a forward contract on the euro (EUR).
The standard deviation of quarterly changes in the USD/NOK exchange rate is 0.005. The standard deviation of quarterly changes in the USD/EUR forward rate is 0.025. The correlation between the quarterly changes in the USD/NOK exchange rate and the quarterly changes in the USD/EUR forward rate is 0.85. What is the optimal number of euros to be delivered in the short forward contract according to the minimum variance hedge ratio?
Jumbo Juice's preferred stock pays a constant dividend equal to $4.75 per share. The firm's marginal tax rate is 40 percent. Jumbo Juice incurs a 5 percent.
Why're there gains from international diversification without hedging exchange-rate risk even by exchange rates contribute the substantial proportion of entire risk?
Exchange rate relationships between the U.S. dollars the euro have been quite volatile. When the euro began trading at the beginning of 1999.
Revenues are at the core of a firm's ability to grow and prosper; thus, they are central to the analysis of a firm's profitability. Although the time-of-sale method is the most common technique employed to recognize revenues
What is the probability that both cards dealt are aces or 10-point cards? What is the probability that both of the cards are aces? What is the probability that both of the cards have a point value of 10?
Go to cnbc and explore the video tab by using the key terms reporting and estimate. As you learned in this unit, there are various sources of informatio
Bank Use of Funds : Explain how a bank decides the appropriate percentage of funds that should be allocated to each type of asset.
Describe the progress of the research manuscript as it is considered for publication in a scientific journal. What are the strengths and weaknesses of the peer review process?
We noted during the chapter discussion that banks were one of the earliest adopters of online transaction processing systems. Discuss why OLTP would be so desirable for use in ATM systems.
What is the total corporate value? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000.
how much should the Donald be worth
The company uses an interest rate of 10 percent on all of its projects. Calculate the MIRR of the project using all methods.
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