B. decreased; decreased.C. increased; decreasedD. decreased; increasedE. decreased; stayed the sameA U.S. bank converted S1 million to Swiss francs to make a Swiss franc loan to a valued3.corporate customer when the exchange rate was 1.2 francs per dollar. The boroweragreed to repay the principal plus 5 percent interest in one year. The bomower repaidSwiss francs at loan maturity and when the loan was repaid the exchange rate was 1.3.francs per dollar. What was the bank's dollar rate of return?A. 26.00 percentB. -2.69 percentC. 7.14 percentD. -3.08 percentE. 5.00 percent

) At the time when the loan was taken, exchange rate was 1.2 Swiss Franc per dollar.Therefore, a…

Answered: B. decreased; decreased. C. increased;…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Leader Inc. has the following foreign financing: The company borrowed US$350,000, for five years, when US$1.00 = Cdn$1.02. The exchange rate at the end of the first year is US$1.00 = Cdn$1.03, and at the end of the second year is US$1.00 = Cdn$0.99. Assume the debt was raised at par. Ignore interest. Required: How much exchange gain or loss would be shown in earnings in the second year? (Do not round intermediate calculations.) Exchange Earnings in second year Gain Loss
You are US company, 500,000 BP (British Pound) payable to UK in one year. Answer in terms of US$. Information for Forward Contract: Forward exchange rate (one yr): 1.54 $/BP Information for Money Market Instruments (MMI): Current exchange rate: 1.50 $/BP Investment return at Aerion Fund Management (in UK): 4% annual Interest rate of borrowing from Bank of America (in USA): 2% annual Information you need for Currency Options Contract: Options premium: 0.015 $/BP Interest rate of borrowing from Bank of America (USA): 2% annual Allowed to exercise options at 1.54 $/BP What are the costs of MMI? (Answer in US$ of course. You are US company!) Group of answer choices None of the above $789,343 $735,504 $770,082 $783,452
At the beginning of year 1 the Terranian central bank conducted TEK100 million of dollar selling/terranian kwacha buying intervention. The intervention was undertaken at the rate of 1 dollar per kwacha and immediately afterwards the currency strengthened to 11 dollars per kwacha and stayed there. At the end of year 5 the exchange rate is still at 1.1 whilst kwacha 1 year interest rates are (and have always been) 4% whilst dollar 1 year interest rates are (and have always) been 0.25%. What is the profit/loss of the intervention at the end of year 5 in million Kwacha? Quote you answer to 1 decimal place and express a loss by putting a'in front of your answer (if a profit do not put a '+ Answer: Next pi
Please help with the last one in RED X
5. Suppose that you have local currency equivalents of the following accounts: Savings account $10,000 • Current Account $10,000 • CD (one year maturity) $15,000 • CD (five year maturity) $17,500 plus the following foreign currency accounts: • $10,000 • £10,000 Suppose the bank fails. How much can you expect to recover/to lose from deposit insurance given deposit insurance in the jurisdictions in which you have been assigned? What percent did you, as the depositor, actually recovery of the total sums that were deposited at the failed bank (with all foreign currency accounts converted into the relevant local currency)?
klp.4
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. AU.S. bank can earn 6% on dollar loans or 8% on pound denominated loans to British concerns. The bank currently has $500 million in dollar loans and British pound loans equivalent to $400 million. The loans are funded by dollar denominated CDs paying 4%. All loans and CDs are on single payment terms. The current spot rate for pounds is S1.8604 and the one year forward rate is $1.8405.TWhat is the bank's spread if they fully hedge their exposure to pounds?
A bank enters a reverse repurchase agreement in which it agrrrd to buh T bills from one of its correspondent banks at a price of $10000 with the promise to sell these funds bank at a price of $ 10000, 291.67 ( $10 000 000 plus interest of $ 291.67) after five days. What will be the yield on this transaction
Company A (a U.S. MNC) wants to borrow £10,000,000 at a fixed rate for five year. Company B (a U.K. MNC) wants to borrow $16,000,000 at a fixed rate for five year. Today's exchange rate is £1- $1.6. The information below summarizes what each company can do without using swaps. Company A Company B $ Loans 8 10.6 £ Loans 11.6 12.4 If Company A wants to save 0.3% of the £10,000,000 loan through a Swap Bank, and If Company B wants to save 0.2% of the $16,000,000 loan through a Swap Bank. How much can the Swap bank earn on pound (£) loans (in terms of %) after meeting Company A and Company B's demand? (if your answer is 1.34%, just enter "1.34". If your answer is -1.34%, just enter"-1.34").
You are US company, 500,000 BP (British Pound) payable to UK in one year. Answer in terms of US$. Information for Forward Contract: Forward exchange rate (one yr): 1.54 $/BP Information for Money Market Instruments (MMI): Current exchange rate: 1.50 $/BP Investment return at Aerion Fund Management (in UK): 6% annual Interest rate of borrowing from Bank of America (in USA): 2% annual Information you need for Currency Options Contract: Options premium: 0.015 $/BP Interest rate of borrowing from Bank of America (USA): 2% annual Allowed to exercise options at 1.54 $/BP What are the costs of MMI? (Answer in US$ of course. You are US company!)
QUESTION # 1North Bank has been borrowing in the U.S. markets and lending abroad, thus incurring foreign exchange risk. In a recent transaction, it issued a one-year $2 million CD at 6 percent and funded a loan in euros at 8 percent. The spot rate for the euro was €1.45/$ at the time of the transaction (US being the home country).Information received immediately after the transaction closing indicated that the euro will depreciate to €1.47/$ by year-end. If the information is correct, what will be the realized spread on the loan? What should have been the bank interest rate on the loan to maintain the 2 percent spread? Assume adjustments in principal value are included in the spread.The bank had an opportunity to sell one-year forward marks at €1.46. What would have been the spread on the loan if the bank had hedged forward its foreign exchange exposure?What is interest rate parity theory and calculate that at what forward exchange rate of dollars per euro, an investor in USA would…

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