What is the break-even exchange rate

Assignment Help Financial Management
Reference no: EM132024327

Micca Metals, Inc. is a specialty materials and metals company located in Detroit. The company specializes in specific precious metals and materials that are used in a variety of pigment applications. Micca just purchased a shipment of phosphates from Australia for AUD6,000,000 payable in six months. Six month at-the money call options on AUD6,000,000 at an exercise price of USD0.9000/AUD1 are available at a premium of 3%.

Using the graphs provided in the PowerPoint notes adjusted for the data in this question, illustrate and explain Micca Metals’ position should it use such an option.

What is the break-even exchange rate?

What is the maximum amount that Micca Metals could realize if the exchange rate moves in their favor?

What is the maximum amount they could realize if the exchange rate moves against them?

What would Micca Metals expect future exchange rates to be to motivate the use of this option?

Reference no: EM132024327

Questions Cloud

Differences in public and private sectordismissal practices : In your own words, discuss the differences between public and private sector dismissal practices. To what extent are these practices impacted by collective.
Conditional use permit for day care center on property : You would like it to be changed to High Density Residential zoning with a conditional use permit for a day care center on the property. What should you do?
What is initial monthly payment in each of respective loans : What is the initial monthly payment in each of the respective loans? Compare the amount of interest which would be paid on the 30 year vs. the 15 year loan.
Describe the company you will be using for your project : Describe the company you will be using for your project, and provide the name and contact information for the human resource director or other manager.
What is the break-even exchange rate : What is the break-even exchange rate? What is the maximum amount they could realize if the exchange rate moves against them?
What is the annual deposit required : What is the annual deposit required, if interest rate is 10%?
Assuming that pricing is by no-arbitrage model : How much should Cherie expect to pay for the desired option, assuming that pricing is by a no-arbitrage model?
What is initial monthly payment in each of respective loans : What is the initial monthly payment in each of the respective loans? What would the outstanding balance of the 15 year fixed loan be after 5 years?
What is expected current share price : what is General Industries' expected current share price?

Reviews

Write a Review

Financial Management Questions & Answers

  Calculate the cost of equity capital using the CAPM

You work for HydroTech, a large manufacturer of high-pressure industrial water pumps. The firm specializes in natural disaster services, ranging from pumps that draw water from lakes, ponds, and streams in drought-stricken areas to pumps that remove ..

  What is the required return on the companys stock

Tell Me Why Co. is expected to maintain a constant 5.8 percent growth rate in its dividends indefinitely. If the company has a dividend yield of 7.6 percent, what is the required return on the company’s stock?

  What were hcas liabilities to assets ratios

What were HCA's liabilities-to-assets ratios and times-interest-earned ratios in the years 2005 through 2009?

  Investments concerning shares of stock

Consider each of the following investments concerning shares of stock X: A trader believes that the price of stock X is about to increase substantially, and that the increase is not reflected in current market prices. Choose the investment(s) the tra..

  What is the SFr-USD cross exchange rate

Assume that the USD/Euro exchange rate is currently 1.65 (ie. $1.65/EUR). Simultaneously, suppose the EUR/SFr exchange rate is 0.85 (ie. EUR 0.85/SFr). What is the SFr/USD cross exchange rate? State your answer as SFr/USD , ie. the amount of SFr requ..

  The maturity value of the position

Suppose that a U.S. Treasury note maturing February 15, 2009 is purchased with a settlement date of February 7, 2007. The coupon rate is 4.5% and the maturity value of the position is $1,000,000. The next coupon date is February 15, 2007. What is the..

  Annual coupon payments and all selling at face value

Consider three bonds with 5.60% coupon rates, all making annual coupon payments and all selling at face value.

  What are the firms interest tax savings

Dharma Supply has earnings before interest and taxes (EBIT) of $568,000, interest expenses of $299,000 and faces a corporate tax rate of 34 percent. a. What is Dharma Supply's Net Income? b. What would Dharmas net income be if it didn’t have any debt..

  Residential mortgages

Imagine you have a pool of 30 year residential mortgages (FRMs, fully amortizing), WAC=4%, monthly payments. The pool balance at the beginning of the month is 285,634,760. The mortgages, on average, have already made three years of payments (i.e. the..

  Annual dividend-what is its current value

A firm recently paid a $0.85 annual dividend. If the required return for this stock is 16.50 percent, what is its current value?

  Riding the yield curve will be profitable strategy

Assume the location and shape of the yield curve is not expected to change. “Riding the yield curve” will be a profitable strategy if the yield curve is:

  Dollars in new securities are added to the portfolio

The duration of a $100 million portfolio is 15 years. $40 million dollars in new securities are added to the portfolio, increasing the duration of the portfolio to 12.5 years. What is the duration of the $40 million in new securities?

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