Siam Cement suffered enormous losses during the Asian currency crisis in 1997. When the Thai Baht was devalued from B25.5/$, Siam's interest payments were over $900 million on its outstanding dollar debt (with an average interest rate of 8.1% on its U.S. dollar debt at that time). Assuming Siam took out $53 million in debt in June 1997 and at 8.01% interest, and had to repay it in one year when the spot had risen to B42.2/$, what was the foreign exchange loss incurred on the transaction? $956,793,100 $955,996,510 B855,996,510 B956.793.100

Siam Cement suffered enormous losses during the Asian currency crisis in 1997. When the Thai Baht was devalued from B25.5/$, Siam's interest payments were over $900 million on its outstanding dollar debt (with an average interest rate of 8.1% on its U.S. dollar debt at that time). Assuming Siam took out $53 million in debt in June 1997 and at 8.01% interest, and had to repay it in one year when the spot had risen to B42.2/$, what was the foreign exchange loss incurred on the transaction? $956,793,100 $955,996,510 B855,996,510 B956.793.100

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
Lafayette Group (U.S.). The Lafayette Group, a private equity firm headquartered in Boston, borrows £5,000,000 for one year at 7.375% interest. a. What is the dollar cost of this debt if the pound depreciates from $2.0260 = £1.00 to $1.9460 = £1.00 over the year? b. What is the dollar cost of this debt if the pound appreciates from $2.0260 = £1.00 to $2.1640 = £1.00 over the year? a. What is the dollar cost of this debt if the pound depreciates from $2.0260 = £1.00 to $1.9460 = £1.00 over the year? % (Round to two decimal places.) b. What is the dollar cost of this debt if the pound appreciates from $2.0260 = £1.00 to $2.1640 = £1.00 over the year? % (Round to two decimal places.)
Japan Life Insurance Company invested $10,000,000 in pure-discount U.S. bonds in May 1995 when the exchange rate was 80 yen per dollar. The company liquidated the investment one year later for $10,780,000. The exchange rate turned out to be 110 yen per dollar at the time of liquidation. What rate of return did Japan Life realize on this investment in yen terms? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Atreides International has operations in Arrakis. The balance sheet for this division in Arrakeen solaris shows assets of 39,000 solaris, debt in the amount of 11,000 solaris, and equity of 28,000 solaris. Assume the equity increases by 1,250 solaris due to retained earnings. If the exchange rate at the end of the year is 1.54 solaris per dollar, what does the balance sheet look like? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Assets Assets Balance Sheet (dollars) Debt Equity Total debt & equity Liabilities
Atreides International has operations in Arrakis. The balance sheet for this division in Arrakeen solaris shows assets of 24,000 solaris, debt in the amount of 8,000 solaris, and equity of 16,000 solaris. Assume the equity increases by 1,500 solaris due to retained earnings. If the exchange rate at the end of the year is 1.28 solaris per dollar, what does the balance sheet look like? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Assets Assets Balance Sheet (dollars) Debt and Equity Debt Equity Total debt & equity
4. Masters Corp has a 100,000 foreign currency denominated accounts receivable on its books that is due to be collected in on June 30, 2011. The following are the US dollar equivalents for this receivable at various dates: January 1, 2010 March 31, 2010 $35,000 $38,000 $34,000 December 31, 2010 June 30, 2011 April 30, 2010 What is the FX transaction gain or loss as of the following dates: a. Quarter ending March 31, 2010 b. Month ending April 30, 2010 c. Year ending December 31, 2010 d. Six months ended June 30, 2011 $32,000 $40,000
Required: Japan Life Insurance Company invested $10,000,000 in pure-discount U.S. bonds in May 1995 when the exchange rate was 80 yen per dollar. The company liquidated the Investment one year later for $10,700,000. The exchange rate turned out to be 110 yen per dollar at the time of liquidation. What rate of return did Japan Life realize on this investment in yen terms? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Rate of retum %
Postal Express has outlets throughout the world. It also keeps funds for transactions purposes in many foreign countries. Assume in 2010 it held 280,000 reals in Brazil worth 210,000 dollars. It drew 9 percent interest, but the Brazilian real declined 18 percent against the dollar. a. What is the value of its holdings, based on U.S. dollars, at year-end? (Do not round intermediate calculations.) b. What is the value of its holdings, based on U.S. dollars, at year-end if instead it drew 6 percent interest and the real went up by 10 percent against the dollar? (Do not round intermediate calculations.)
Asian financial crisis and the Thai baht. On July 3, 1997, the Thai baht was unpegged from the U.S. dollar and promptly depreciated from THB 25 = US$1 to THB 60 = US$1. What was the baht's percentage depreciation against the US$? Compute the percentage depreciation/appreciation of the baht from the U.S. dollar perspective. Do you get the same result with a minus sign as you did from the baht's perspective? Explain.
Megahurtz International Car Rentals has rent -a-car outlets throughout the world. It keeps funds for transaction purposes in many foreign currencies. Assume that in 200XX it held 100,000 reals in Brazil worth $42,000. It earned. 12 percent interest, but the real declined 20 percent against the dollar. a. What is the value of its holdings, based on Canadian dollars, at year-end? ( Do not round intermediate calculations.) Value of the holdings Sb. What is the value of its holdings, based on Canadian dollars, at year end if it earned 9 percent and the real went up by 10 percent against the dollar? (Do not round intermediate calculations.) Value of the holdings S
4) Masters Corp has a 100,000 foreign currency denominated accounts receivable on its books that is due to be collected in on June 30, 2011. The following are the US dollar equivalents for this receivable at various dates: Jan 1, 2010 $35,000 Dec 31, 2010 $32,000 March 31, 2010 $38,000 June 30, 2011 $40,000 April 30, 2010 $ 34,000 What is the FX transaction gain or loss as of the following dates? a) Quarter ending March 31, 2010
Assume that a firm issues $500,000,000 of U.S. commercial papers (and therefore uses a 360-day year for CP calculations) with a 30-day maturity at a discount of 0.5%. The annualized dealer fee is 0.175% and the cost of a backup line of credit is 0.25%. a. What is the amount of usable funds? b. What is the amount of dealer fee? c. What is the amount of backup line of credit? d. What is the annualized cost of the paper?

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