You are importing TV sets worth ¥10,000,000 from a Japanese manufacturer, and this amount is payable after 6 months. You can hedge your exchange risk by:
A. buying Japanese yen in the forward market.
B. selling Japanese yen in the forward market.
C. borrowing Japanese yen.
D. doing nothing.
88. Buckingham, Inc., a British corporation, owes Yank Inc., a U.S. corporation, $1 million due in 2 months. How can Buckingham hedge the exchange risk?
A. Sell pounds in the spot market
B. Buy pounds in the forward market
C. Sell dollars in the spot market
D. Buy dollars in the forward market
89. A firm intends to hedge against exchange loss, a large future payment that must be made in a foreign currency. Which of the following identifies the cost of such a hedge?
A. Difference between expected and current spot rates
B. Difference between expected and current forward rates
C. Difference between the forward premium and the forward discount
D. Difference between the forward rate and the expected future spot rate
90. Arbitrageurs are said to look for riskless profits by:
A. contracting in the forward exchange markets.
B. buying at the spot rate and selling at the forward rate.
C. buying in one market and selling in another to take advantage of different prices for the same good.
D. buying short-term bonds and converting them to long-term bonds.
91. On average, empirical evidence suggests that those who cover foreign exchange commitments in the forward market pay a premium of approximately _____ to avoid exchange rate risk.
92. One of the drawbacks of using forward contracts to hedge foreign exchange risk from payables is that the:
A. transaction costs in the forward market are high.
B. forward rates are always lower than spot rates.
C. hedged currency could appreciate during the period.
D. hedged currency could depreciate during the period.
93. Your firm, which operates in the United States, has a contractual payment of £1 million due in 3 months. Which of the following methods would be considered speculative regarding your exchange rate risk?
A. Buy 1 million pounds now at the current spot rate.
B. Buy 1 million pounds in 3 months at the current spot rate.
C. Contract forward to buy 1 million pounds in 3 months.
D. Borrow dollars, convert to pounds at spot, and invest for 3 months.
94. You're hoarse from explaining to your supervisor that the cost, if any, of hedging exchange rate risk can be thought of as an insurance premium to avoid surprises. What is the cost of hedging a 2 million euro commitment if the spot rate is €1.6/$, the forward rate is €1.55/$, and the expected spot rate at the end of the hedge is €1.6/$?
Bent shaft ABC is welded to the vertical shaft, which rotates at constant speed Ω. The angle of rotation of the square plate about axis BC is φ, which is an arbitrary fun...Jun 16 2020
Replacement Decision. A forklift will last for only 2 more years. It costs $5,000 a year to maintain. For $20,000 you can buy a new lift which can last for 10 years and s...Jun 18 2020
Adam and Alice are a young married couple; they are currently staying in Ipoh. Both are ambitious to excel in establishing their frozen business in Perak during the CMCO ...Apr 11 2021
a. Sell one 0.975-strike call and buy two 1.034-strike calls. b. Sell two 1.00-strike calls and buy three 1.034-strike calls.Nov 24 2019
The first four terms in the Fourier series of a periodic waveform are(a) Find the period and fundamental frequency in rad/s andHz. Identify the harmonics present in the...May 24 2020
The data below describe a three-stock financial market that satisfies the single-index model.StockCapitalizationBetaMean Excess ReturnStandard DeviationA$3,0001.010%40%B$...May 15 2020
3 ml of commercial acid solution (molar mass =98 g/mol) have been titrated with NaOH (0.2 M) using chemical indicator the Vi of NaOH = 11 ml, and the Vp= 14.5 ml. Calcul...May 18 2021
Respond to the following in a minimum of 175 words, please type response:Discuss the differences and relationship between a business level strategy and a corporate level ...Aug 27 2020
How did the solution provided by Talend reduce the job time by 90 percent?Jul 14 2020
You would like to contribute $50,000 towards your grandchildâs college education 15 years from now. How much money must you set aside today for this purpose if you beli...May 31 2021