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What is the exchange rate of the Mexican peso

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Reference no: EM132765369

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Q1. You are the vice-president of finance for Exploratory Resources, headquartered in Calgary. In January 2012, your firm's American subsidiary obtained a six-month loan of $3.0 million (U.S.) from a bank in Calgary to finance the acquisition of an oil-producing property in Oklahoma. The loan will also be repaid in U.S. dollars. At the time of the loan, the spot exchange rate was US$1.0145/C$ and the U.S. currency was selling at a premium in the forward market. The June 2012 futures contract (face value = $300,000 per contract) was quoted at US$1.0127.

A. How much is the bank expected to lose/gain due to foreign exchange risk?

Q2. Suppose a Mexican peso is selling for $0.3405 and a Brazilian real is selling for $1.4958.

What is the exchange rate (cross rate) of the Mexican peso to the Brazilian real? That is, how many Mexican pesos are equal to a Brazilian Real?

Q3. A French investor buys 300 shares of Teck for $15,000 ($50 per share). Over the course of a year, Teck goes up by $8.65.

a. If there is a 10 percent gain in the value of the dollar versus the euro, what will be the total percentage return to the French investor?

b. Now assume the stock increases by $10 but the dollar decreases by 10 percent versus the euro. What will be the total percentage return to the French investor?

Q4. The following spot and forward rates for the euro ($/euro) were reported:

Spot 1.6354

30-day forward 1.6353

90-day forward 1.6353

180-day forward 1.6360

A. What was the 30-day forward premium (or discount)?

B. What was the 180-day forward premium (or discount)?

C. Suppose you executed a 90-day forward contract to exchange 190,000 euros into Canadian dollars. How many dollars would you get 90 days hence?

D. Assume a French bank entered into a 180-day forward contract with TD Bank to buy $190,000. How many euros will the French bank deliver in six months to get the Canadian dollars?

Reference no: EM132765369

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