that the price of a product in Canada is $150 and in US is $180. If the cost of transporting the product is $15, then: a. it is possible to engage in arbitrage. b. it is not possible to engage in arbitrage. c. it is inconclusive whether arbitrage is pos

that the price of a product in Canada is $150 and in US is $180. If the cost of transporting the product is $15, then: a. it is possible to engage in arbitrage. b. it is not possible to engage in arbitrage. c. it is inconclusive whether arbitrage is pos

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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H2.
XYZ Marbles (PTY) Ltd has entered into agreement with Buy and Deliver (Pty) Ltd to provide thefollowing goods to its customer in South Korea. The terms of the agreement are as below:1. Buy and Deliver (Pty) Ltd is to arrange for the transport of the marbles from Namibia to the SouthKorean customer. The cost of transport will be on XYZ Marbles (Pty) Ltd2. Buy and Deliver (Pty) Ltd is to clear all the export requirements XYZ (Pty) Ltd in Namibia.3. XYZ Marbles (Pty) holds the risk of the Marbles stock until they reach the customer.4. XYZ (Pty) Ltd has set the price of the Marbles at N$ 1,000,000.00. Buy and Deliver is not allowed tomake any changes to the price set. The transaction has been completed as below:01 January 2020XYZ Marbles (Pty) Ltd completes the extraction of the marbles.30 January 2020Buy and Deliver arranges the transport to South Korea of the Marbles 28 February 2020 The customer receives the goods and pays over the sale amount of N$ 1,000,000 to XYZ Marbles (Pty) Ltd 28…
Each of the statements below is either true (T) or false (F). Required: According to NZ IFRS 7, NZ IRS 9 and NZ IAS 32, indicate for each of the statements whether it is T or F. If the statement is false, rewrite the statement to make it true, otherwise leave it blank. Item (a) (b) (c) Information & Statement Statement: A stronger NZ$ is good for NZ importers as the foreign currency denominated accounts payable will be converted into lower NZ$ value. Rewrite: Information: A NZ importer has bought a call option contract to fair value hedge its accounts payable US$50,000. The exercise rate in the option is 1$NZ = US$0.6 with a contract amount US$50,000. On settlement date, the spot exchange rate is 0.65. Statement: Therefore, the importer will exercise the option as the option value is worth NZ$6,410 on settlement date. Rewrite: Information: A company issued 1 million convertible notes on 1 January 2022. The arrangement of the notes is that the noteholder has the option to convert one…
If a U.S.-based company regularly purchases goods from foreign suppliers in Japan with the invoice price denominated in Japanese Yen. And if the U.S. company has experienced several foreign exchange losses due to the depreciation of the Japanese Yen. Which type of hedging instrument (Foreign currency forward contract or foreign currency option) the company should employ? Please provide a justification for the selection. Also, compare the advantages and disadvantages of using (Forward contracts) and (Options) to hedge foreign exchange risk.
8 - What is the most risky payment method for the exporter company?A) Payment with acceptance creditB) Payment by letter of credit C) Pre-financingD) Cash against goods E) Advance payment
(i) In what circumstances should the method of translating into the functional currency(the temporal method)be used? discuss two advantages and two disadvantages of translating into the functional currency(the temporal method). Your answer should not be more than 210 words. (ii) How does the method of translating into the functional currency(the temporal method) differ from the method of translating into the presentation currency(the closing rate method)? Your answer should not be more than 90 words.
1. The state that an competitive markets free of transportation costs and barriers to identical trade (such as tariffs), products sold in different countries when must sell for the same price their price is expressed in terms of the same currency.
4
Consider a US-based MNC with a wholly owned Italian subsidiary. Following a depreciation of the dollar against the euro, which of the following conclusions are correct? Group of answer choices a. The cash flow in euros could be altered due a change in the firm's competitive position in the marketplace. b. A given operating cash flow in euros will be converted to a higher US dollar cash flow. c. Both A and B d. None of the above
7. XYZ, a US company has a subsidiary in Korea. The Korean sub sells inventory to a Japanese company with the sale denominated in US dollars. Between the date of sale and the date the receivable is collected the Korean won strengthens 10% against the US dollar. Explain if there is a foreign exchange gain or loss or no FX impact and why Thank you
Question 3 Consider the following information. 1. On September 1, 2022, a US firm contracts to buy equipment with an asking price of £100,000 from a firm in the U.K. The firm will take delivery and will pay for the equipment on March 1, 2023. 2. On that same day, September 1, 2022, the US firm enters into a forward contract to buy £100,000 for US$1.60/£ on March 1, 2023. 3. Spot rates and forward rates were quoted as follows: Spot Rate $1.59/£ $1.55/£ March 1, 2023 $1.57/£ On March 1, 2022, the payment of £100,000 was made to the supplier of the equipment. 4. September 1, 2022 September 30, 2022 Forward Rate $1.60/£ $1.53/£ Required: a. Prepare the journal entries needed for the forward contract transaction done on September 1, 2022. b. Prepare the journal entries needed for the transactions to track the forward contract on September 30, 2022, the financial year-end of the US firm. c. Prepare the transactions for the recognition of the actual purchase of the equipment and settlement of…
4. A reputed importer in Canada wants to import certain items from you. The importer isready to place repeated order of INR 500000 each but demands credit period of 90 daysfrom the receipt of goods in Canada. Which payment method you will choose? Whataccording to you is the safest method of payment in International Trade? Discuss with thehelp of suitable example.

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