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1. A Singaporean company is exporting orchids to Japan. The company has a receivable of JPY5,000,000 due in three months’ time. The company approaches its bank and enters into a forward exchange contract. Rates are quoted as SGD/JPY84.45-50, forward points 9-6. Explain and show how the transactions will take place today and in three months’ time. Show your calculations.
2. Explain how an Australian company could hedge its net USD payables using a borrow, spot and invest money-market hedging strategy. Illustrate your answer based on the company having a USD1 million payable due in 180 days. Assume a spot rate of AUD/USD0.9224-30, a US interest rate of 2.30 per cent per annum and an Australian interest rate of 5.40 per cent per annum.
You're trying to save to buy a new $201,000 Ferrari. You have $51,000 today that can be invested at your bank. The bank pays 5.9 percent annual interest on its accounts. How long will it be before you have enough to buy the car?
The risk-free rate of interest is 7.0 percent continuously compounded. What is the delta of a put option with strike price 45 and maturity of 5 months?
Sweet Fruit, Inc. has a $1000 par value bond that is currently selling for $1280. It has an annual coupon rate of 9.90 percent, paid semi annually, and has 10-years remaining until maturity. What would the annual yield to maturity be on the bond if y..
Suppose one of the suppliers to Seattle Health System offers terms of 3/20, net 60. When does the system have to pay its bills from this supplier?
Riverview Company is evaluating the proposed acquisition of a new production machine.
Suppose that you are an investment manager with a large portfolio of technology-oriented stocks. What futures position might you consider taking?
If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Sam and Bond Dave? (Negative amounts should be indicated by a minus sign.
What are the advantages of investing in the common stock rather than the corporate bonds of a company? - Compare the certainty of returns for a bond with those for a common stock.
Which of the following statements is correct about the early exercise of American options?
If the spot rate is pound 0.5/SF, what is the expected spot exchange rate between the Swiss franc and the British pound in nine months?
Assume that you are the chief financial officer at Porter Memorial Hospital. The CEO has asked you to analyze two proposed capital investments – Project X and project Y. Each project requires a net investment outlay of $10,000, and the opportunity co..
If you plan to invest for 2 years, what annual rate of return must the fund portfolio earn for you to prefer the fund to the CD?
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