User Account

All Pages

Treasurer of IBM does not wish to bear any exchange risk

Assignment Help Business Management
Reference no: EM133239425

1. Suppose that the treasurer of IBM has an extra cash reserve of $100,000 to invest for six months. The interest rate is 8 percent per annum in the United States and 7 percent per annum in Germany. Currently, the spot exchange rate is 0.99 dollars per €, and the six- month forward exchange rate is 1.01 dollars per €. The treasurer of IBM does not wish to bear any exchange risk (no speculation). Where should he/she invest to maximize the return?

2. While you were visiting London, you purchased a Jaguar for £35,000, payable in three months. You have enough cash at your bank in New York City, which pays 0.35% interest per month, compounding monthly, to pay for the car. Currently, the spot exchange rate is $1.45/£, and the three-month forward exchange rate is $1.40/£. In London, the money market interest rate is 2.0% for a three-month investment. There are two alternative ways of paying for your Jaguar.

1. Keep the funds at your bank in the U.S. and buy £35,000 forward.

2. Buy a certain pound amount spot today and invest the amount in the U.K. for three months so that the maturity value becomes equal to £35,000. Evaluate each payment method. Which method would you prefer? Why?

Reference no: EM133239425

Questions Cloud

Liquidity affect the nominal interest rate : How would an increase in liquidity affect the nominal interest rate? How would an increase in liquidity affect the nominal interest rate?
Impact russia-ukraine war on world economy : Analyse what impact the Russia-Ukraine War has on the world economy as a whole. Discuss what you think will be the impact to the US stock market.
Forward contract to hedge currency risk : Indicate whether you should use a long (buy) or short (sell) forward contract to hedge currency risk.
What is the pseudo probabilities : Suppose Aurora's management decides to buy a stock whose current price is $900, what is the pseudo probabilities.
Treasurer of IBM does not wish to bear any exchange risk : The treasurer of IBM does not wish to bear any exchange risk (no speculation). Where should he/she invest to maximize the return?
Calculate firm cost of ordinary equity : Calculate the firm's cost of debt. Calculate the firm's cost of ordinary equity. Calculate the firm's cost of preference shares
Historical returns of particular asset class : Discuss the historical returns of a particular asset class, and analyze the risks and returns inherent in the asset class that you are writing about.
Explain the linkage between exchange rates : Explain the linkage between exchange rates now, different interest rates in different countries, and exchange rates in the future.
Annual rate of return : You purchased a piece of art 7 years ago for $7,600 with the hope it would increase in value. What was your annual rate of return?

Reviews

Write a Review

Business Management Questions & Answers

  Caselet on michael porter’s value chain management

The assignment in management is a two part assignment dealing 1.Theory of function of management. 2. Operations and Controlling.

  Mountain man brewing company

Mountain Man Brewing, a family owned business where Chris Prangel, the son of the president joins. Due to increase in the preference for light beer drinkers, Chris Prangel wants to introduce light beer version in Mountain Man. An analysis into the la..

  Mountain man brewing company

Mountain Man Brewing, a family owned business where Chris Prangel, the son of the president joins. An analysis into the launch of Mountain Man Light over the present Mountain Man Lager.

  Analysis of the case using the doing ethics technique

Analysis of the case using the Doing Ethics Technique (DET). Analysis of the ethical issue(s) from the perspective of an ICT professional, using the ACS Code of  Conduct and properly relating clauses from the ACS Code of Conduct to the ethical issue.

  Affiliations and partnerships

Affiliations and partnerships are frequently used to reach a larger local audience? Which options stand to avail for the Hotel manager and what problems do these pose.

  Innovation-friendly regulations

What influence (if any) can organizations exercise to encourage ‘innovation-friendly' regulations?

  Effect of regional and corporate cultural issues

Present your findings as a group powerpoint with an audio file. In addition individually write up your own conclusions as to the effects of regional cultural issues on the corporate organisational culture of this multinational company as it conducts ..

  Structure of business plan

This assignment shows a structure of business plan. The task is to write a business plane about a Diet Shop.

  Identify the purposes of different types of organisations

Identify the purposes of different types of organisations.

  Entrepreneur case study for analysis

Entrepreneur Case Study for Analysis. Analyze Robin Wolaner's suitability to be an entrepreneur

  Forecasting and business analysis

This problem requires you to apply your cross-sectional analysis skills to a real cross-sectional data set with the goal of answering a specific research question.

  Educational instructional leadership

Prepare a major handout on the key principles of instructional leadership

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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