Intermediate Financial Management
14th Edition
ISBN: 9780357516782
Author: Brigham, Eugene F., Daves, Phillip R.
Publisher: Cengage Learning
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Chapter 27, Problem 11P
Boisjoly Watch Imports has agreed to purchase 15,000 Swiss watches for 1 million francs at today’s spot rate. The firm’s
On the same day, Desreumaux agrees to purchase 15,000 more watches in 3 months at the same price of 1 million Swiss francs.
- a. What is the cost of the watches in U.S. dollars, if purchased at today’s spot rate?
- b. What is the cost in dollars of the second 15,000 batch if payment is made in 90 days and the spot rate at that time equals today’s 90-day forward rate?
- c. If the exchange rate for is 0.50 Swiss francs per dollar in 90 days, how much will Desreumaux have to pay (in dollars) for the watches?
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The risk to the U.S. company is that the value of the Swiss franc will decline and
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therefore it should enter into a contract to sell Swiss francs forward
The risk to the U.S. company is that the value of the Swiss franc will rise and
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Williams Corp. is considering signing contracts that will obligate the firm to purchase 100000 Swiss Francs worth of computer equipment at the end of each calendar quarter for the next 2 years. Williams is also signing a contract with a local high school that will purchase this equipment from Williams at a price of $87000 (U.S.) per quarter. What would Williams' profit or loss be over the life of the contract (8 quarters) if the "In US Dollar" exchange rate is $0.85over the life of the contract?$______________________Place your answer to the nearest dollar without a dollar sign or a comma.
Boisjoly Watch Imports has agreed to purchase 15,000 Swiss watches for 1 million francs at today's spot rate. The firm's financial manager, James Desreumaux, has noted the following current spot and forward rates:
U.S. Dollar / Franc
Franc / U.S. Dollar
Spot
1.6590
0.6028
30-day forward
1.6540
0.6046
90-day forward
1.6460
0.6075
180-day forward
1.6400
0.6098
On the same day, Desreumaux agrees to purchase 15,000 more watches in 3 months at the same price of 1 million francs.
What is the cost of the watches, in U.S. dollars, if purchased at today's spot rate?
Cost of Watches
=
Swiss Francs
/
Franc/U.S
Dollar
Chapter 27 Solutions
Intermediate Financial Management
Ch. 27 - Define each of the following terms: a....Ch. 27 - Prob. 2QCh. 27 - Prob. 3QCh. 27 - Prob. 4QCh. 27 - If the United States imports more goods from...Ch. 27 - Prob. 6QCh. 27 - Should firms require higher rates of return on...Ch. 27 - Prob. 8QCh. 27 - Prob. 9QCh. 27 - Prob. 10Q
Ch. 27 - Prob. 1PCh. 27 - The nominal yield on 6-month T-bills is 7%, while...Ch. 27 - Prob. 3PCh. 27 - If euros sell for 1.50 (U.S.) per euro, what...Ch. 27 - Suppose that the exchange rate is 0.60 dollars per...Ch. 27 - Prob. 6PCh. 27 - Prob. 7PCh. 27 - Prob. 8PCh. 27 - Prob. 9PCh. 27 - Prob. 10PCh. 27 - Boisjoly Watch Imports has agreed to purchase...Ch. 27 - Prob. 12PCh. 27 - Prob. 13PCh. 27 - Prob. 14PCh. 27 - Prob. 1MCCh. 27 - Prob. 2MCCh. 27 - Prob. 3MCCh. 27 - Prob. 4MCCh. 27 - Prob. 5MCCh. 27 - Prob. 6MCCh. 27 - Prob. 7MCCh. 27 - Prob. 8MCCh. 27 - Prob. 9MCCh. 27 - Prob. 10MCCh. 27 - Prob. 11MC
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