Forward rate is used as a market-based forecast

Assignment Help Financial Management

Reference no: EM13920021

The value of each Latin American currency relative to the dollar is dictated by supply and demand conditions between that currency and the dollar. The values of Latin American currencies have generally declined substantially against the dollar over time. Most of these countries have high inflation rates and high interest rates. The data on inflation rates, economic growth, and other economic indicators are subject to error, because limited resources are used to compile the data.

a. If the forward rate is used as a market-based forecast, will this rate result in a forecast of appreciation, depreciation, or no change in any particular Latin American currency? Explain.

b. If technical forecasting is used, will this result in a forecast of appreciation, depreciation, or no change in the value of a specific Latin American currency? Explain.

c. Do you think that U.S. firms can accurately forecast the future values of Latin American Currencies?

Reference no: EM13920021

Questions Cloud

Compute the pi statistic for project : Compute the PI statistic for Project X and note whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 10 percent. Time: 0 1 2 3 4 5 Cash flow: -80 -80 0 115 90 65 35.51%, accept 55...

Should the project be accepted or rejected : Compute the NPV statistic for Project Y if the appropriate cost of capital is 12 percent. Project Y Time: 0 1 2 3 4 Cash flow –$8,300 $3,410 $4,240 $1,580 $360 NPV $ should the project be accepted or rejected? Accepted Rejected

Difference between net income and retained earnings. : What would Laura's Flowers report for net income and retained earnings for the years 2013, 2014, and 2015?

Compute the discounted payback statistic for project : Compute the discounted payback statistic for Project D if the appropriate cost of capital is 10 percent and the maximum allowable discounted payback is four years.

Forward rate is used as a market-based forecast : The value of each Latin American currency relative to the dollar is dictated by supply and demand conditions between that currency and the dollar. If the forward rate is used as a market-based forecast, will this rate result in a forecast of apprecia..

Use the mirr decision rule to evaluate this project : Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 12 percent, and that the maximum allowable payback and discounted payback statistics for your ..

Determine the balance in the retained earnings account : Determine the balance in the Retained Earnings account as of January 31, 2013.

Securitization combined with borrowing-irrational exuberance : Assume that securitization combined with borrowing and irrational exuberance in Hyperville have driven up the value of existing financial securities at a geometric rate, specifically from $6 to $12 to $24 to $48 to $96 to $192 over a six-year time pe..

Straight-line basis toward a zero salvage value : Roten Manufacturing Company is considering an investment on a machine for producing auto parts. The machine costs $250,000 today, will have a five-year life and will be depreciated over a five-year life on a straight-line basis toward a zero salvage ..

User Account

All Pages