International Finance
国际金融作业代写 1.You are living in Tokyo and face the following posted exchange rates: 1 British pound = 128 Japanese yen; 1 Australian dollar = 82 Japanese yen;
1.
You are living in Tokyo and face the following posted exchange rates: 1 British pound = 128 Japanese yen; 1 Australian dollar = 82 Japanese yen; 1 British pound = 1.60 Australian dollars. You begin with 100,000 yen.
a. How can you make money and what would your profit be in yen? (4 points).
b. What AUD to GBP or GBP to AUD exchange rate would eliminate the arbitrage? Please show your workings. (2 points)
c. Describe the importance of arbitrage and cross-exchange rates in the foreign exchange market. (2 points)
d. What specific characteristics of the foreign exchange market lend support to your answer? (2 points)
2. 国际金融作业代写
You have 1 million AUD to invest for 90 days and you are trying to decide between investing in AUD at 8% per year or in Germany at 6% per year. Currently, the spot exchange rate is EUR 0.74000 = 1 AUD and the 90- day forward exchange rate is EUR 0.73637 = 1 AUD.
a. Outline the steps and show the calculations for investing in Germany without bearing any foreign exchange risk? (4 points)
b. To maximize your return (without bearing any foreign exchange risk), should you invest in Australia or Germany? Provide the rationale for your answer. (2 points)
c. Why is interest rate parity such an important concept in the foreign exchange market? (2 points)
d. Based on your knowledge of the international parity conditions, is the scenario outlined in parts a and b realistic? Explain. (2 points)
3. 国际金融作业代写
According to the Deutsche Bank World Price Report, a pair of Adidas Superstar running shoes sells for CHF 137 in Zurich and USD 80 in the US. The CHF is currently at parity with the USD i.e., 1 USD = 1 CHF.
a. What are two issues with using the Adidas Shoe Price Index to measure PPP? Do you think it is better than using the Big Mac Index? Explain. (2 points)
b. Based on the shoe prices, what should the CHF to USD or USD to CHF exchange rate be and what is the rationale for your answer? (2 points)
c. Is the Swiss franc over- or under-valued? Explain. (2 points)
d. The general level of inflation as measured by the consumer price index is expected to be 2% per year in the US next year and 0.2% in Switzerland. Assuming perfect markets, what would you expect the CHF exchange rate to be in one year? Explain. (2 points)
e. Why have most developed countries elected to control inflation? What do you think is the greatest disadvantage of this choice? (2 points)
4.
CSL Ltd. expects to receive royalty payments of £1.25 million next month. It needs to protect these receipts against a drop in the pound, but the CFO believes that the most likely price of the pound in 30 days will be $1.6400, with an expected minimum of $1.6250 and maximum of $1.7010. CSL can buy pound put options with a strike price of $1.6612 at a premium of 2.0 cents per pound. The spot price of the pound is currently $1.6560. The option contract size is £31,250.
a. How many contracts would CSL need to protect its receipts? (1 point)
b. What would be the total premium? (1 point)
c. If the pound settled at i. its most likely value. ii. the minimum and iii. the maximum, would the CFO exercise the option? Provide your rationale. Calculate CSL’s net gain on the option position in each case? (5 points)
d. What is your opinion of the treasurer’s choice of hedging instrument? What single question would you like to ask the treasurer in order to better answer this question? (3 points)
5. 国际金融作业代写
American Eagle (AE) wants to finance a £10,000,000 expansion of a British plant while British Bulldogs (BB) wants to finance dollar borrowing in the amount of $16,000,000. The Spot exchange rate is $1.60 = £. AE can borrow in dollars at 8% and in pounds at 11.6% while BB can borrow in dollars at 10% and in pounds at 12%. The terms of the swap are: The swap bank will pay AE 8% in dollars and will pay BB 12% in pounds. AE will pay the swap bank 11% in pounds and BB will pay the swap bank 9.4% in dollars.
a. Draw the swap diagram clearly showing the rates (and currency) that AE, BB and the Swap Bank will pay and receive. (2 points)
b. What will the net benefit (in AUD) of the swap be for the swap bank? (3 points)
c. Why was (and is) comparative advantage such an important concept in the creation and evolution of the swap market? Please relate your answer to the IBM-World Bank case. (4 points)
d. Why might British Bulldogs face such an unfavourable borrowing rate in the US (1 point)?
6. 国际金融作业代写
Hedging at F Mayer On September 16, 2014, Noah Goode, CFO of F Mayer Imports was contracting to import San Pellegrino, Lurpak butter, and Callebaut chocolate which would be purchased Euro. The AUD traded for around 0.80 EUR for most of 2012, dropped to 0.70 EUR in July 2013, reached a low of 0.64 EUR in January 2014, bounced back to 0.729 by 1 September, and retreated back to its current level of 0.695 EUR. F Mayer specialises in importing high end European gourmet food products for distribution in the Australian markets.
a. Identify and describe the type(s) and economic seriousness of the foreign exchange risk he is facing (3 points)
b. Should he hedge his position in EUR? If yes, what percentage? Justify your choice. (3 points)
c. On 5 Sept 2014, the European Central Bank further reduce its benchmark interest rate to a record low 0.05% and on September 2, 2014, the Australian Reserve Bank of Australian decided to leave the case rate unchanged at 2.5%. What would you expect the April 2012 AUD to EUR (or EUR to AUD) forward rate to be? Provide the rationale. (4 points)
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