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strayer university ITB400 QUIZ 4

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Question;?;A U.S.-based MNC with exposure to the Swedish;krona could best cross-hedge with;Answer;?;Question 2;3 out of 3 points;Suppose that the exchange rate is ?1.25 = ?1.00.;Options (calls and puts) are available on the Philadelphia exchange in units;of ?10,000 with strike prices of $1.60/?1.00.;Options (calls and puts) are available on the Philadelphia exchange in units;of ?10,000 with strike prices of $2.00/?1.00.;For a U.S. firm to hedge a ?100,000 receivable;Answer;?;Question 3;3 out of 3 points;If you have a long position in a foreign;currency, you can hedge with;Answer;?;Question 4;3 out of 3 points;An exporter can shift exchange rate risk to their;customers by;Answer;?;Question 5;3 out of 3 points;XYZ Corporation, located in the United States;has an accounts payable obligation of ?750 million payable in one year to a;bank in Tokyo. The current spot rate is ?116/$1.00 and the one year forward;rate is ?109/$1.00. The annual interest rate is 3 percent in Japan and 6;percent in the United States. XYZ can also buy a one-year call option on yen;at the strike price of $0.0086 per yen for a premium of 0.012 cent per yen.;Assume that the forward rate is the best predictor of the future spot rate.;The future dollar cost of meeting this obligation using the option hedge is;Answer;?;Question 6;3 out of 3 points;XYZ Corporation, located in the United States;has an accounts payable obligation of ?750 million payable in one year to a;bank in Tokyo. The current spot rate is ?116/$1.00 and the one year forward;rate is ?109/$1.00. The annual interest rate is 3 percent in Japan and 6;percent in the United States. XYZ can also buy a one-year call option on yen;at the strike price of $0.0086 per yen for a premium of 0.012 cent per yen.;The future dollar cost of meeting this obligation using the forward hedge is;Answer;?;Question 7;3 out of 3 points;Suppose that Boeing Corporation exported a Boeing;747 to Lufthansa and billed ?10 million payable in one year. The money market;interest rates and foreign exchange rates are given as follows;Assume that Boeing sells a currency forward contract of ?10 million for;delivery in one year, in exchange for a predetermined amount of U.S. dollar.;Which of the following is (or are) true?;On the maturity date of the contract Boeing will;(i) have to deliver ?10 million to the bank (the counterparty of the forward;contract);(ii) take delivery of $14.6 million;(iii) have a zero net pound exposure;(iv) have a profit, or a loss, depending on the future changes in the;exchange rate, from this British sale;Answer;?;Question 8;3 out of 3 points;An exporter faced with exposure to a depreciating;currency can reduce transaction exposure with a strategy of;Answer;?;Question 9;3 out of 3 points;ABC Inc., an exporting firm, expects to earn $20;million if the dollar depreciates, but only $10 million if the dollar;appreciates. Assume that the dollar has an equal chance of appreciating or;depreciating. Step one: calculate the expected tax of ABC if it is operating;in a foreign country that has progressive corporate taxes as shown below;Corporate income tax rate = 15% for the first $7,500,000.;Corporate income tax rate = 30% for earnings exceeding $7,500,000.;Step two: ABC is considering implementing a hedging program that will;eliminate their exchange rate risk: they will make a certain $15 million;whether or not the dollar appreciates or depreciates. How much will they save;in taxes if they implement the program?;Answer;?;Question 10;3 out of 3 points;With any hedge;Answer;?;Question 11;3 out of 3 points;ABC Inc., an exporting firm, expects to earn $20;million if the dollar depreciates, but only $10 million if the dollar;appreciates. Assume that the dollar has an equal chance of appreciating or;depreciating. Calculate the expected tax of ABC if it is operating in a;foreign country that has progressive corporate taxes as shown below;Corporate income tax rate = 15% for the first $7,500,000.;Corporate income tax rate = 30% for earnings exceeding $7,500,000.;Answer;?;Question 12;3 out of 3 points;An exporter faced with exposure to an appreciating;currency can reduce transaction exposure with a strategy of;Answer;?;Question 13;3 out of 3 points;In evaluating the pros and cons of corporate risk;management, "market imperfections" refer to;Answer;Selected Answer;information asymmetry, differential transaction;costs, default costs, and progressive corporate taxes.;Correct Answer;information asymmetry, differential transaction;costs, default costs, and progressive corporate taxes.;?;Question 14;3 out of 3 points;The most direct and popular way of hedging;transaction exposure is by;Answer;?;Question 15;3 out of 3 points;If you own a foreign currency denominated bond;you can hedge with;Answer;?;Question 16;3 out of 3 points;Generally speaking, a firm is subject to high;degrees of operating exposure;Answer;?;Question 17;3 out of 3 points;A U.S. firm holds an asset in Great Britain and;faces the following scenario;WhereP* = Pound sterling price of the asset held by the U.S. firm;The CFO decides to hedge his exposure by selling forward the expected value;of the pound denominated cash flow at F1($/?) = $2/?. As a result;Answer;?;Question 18;0 out of 3 points;On the basis of regression Equation we can decompose the variability of the dollar value of the;asset, Var(P), into two separate components.;Answer;?;Question 19;3 out of 3 points;Operating exposure can be defined as;Answer;?;Question 20;3 out of 3 points;A flexible sourcing policy;Answer;?;Question 21;3 out of 3 points;Before you can use the hedging strategies such as;a forward market hedge, options market hedge, and so on, you should consider;running a regression of the form. When reviewing the output, you should initially focus on;Answer;?;Question 22;3 out of 3 points;A firm with a highly elastic demand;for its products;Answer;?;Question 23;3 out of 3 points;The exposure coefficient in the regression informs;Answer;?;Question 24;3 out of 3 points;Operating exposuremeasures;Answer;?;Question 25;3 out of 3 points;A firm that is committed to keeping manufacturing;facilities in only the home country (and not developing multiple production;sites in a variety of countries) can;Answer;?;Question 26;3 out of 3 points;It is conventional to classify foreign currency;exposures into the following types;Answer;?;Question 27;3 out of 3 points;Economic exposurerefers to;Answer;?;Question 28;3 out of 3 points;From the perspective of the U.S. firm that owns;an asset in Britain, the exposure that can be measured by the coefficient b;in regressing the dollar value P of the British asset on the;dollar/pound exchange rate S using the regression equation is;Answer;?;Question 29;3 out of 3 points;The firm may not be subject to high degrees of;operating exposure;Answer;?;Question 30;3 out of 3 points;With regard to operational hedging versus financial;hedging;Answer

 

Paper#46427 | Written in 18-Jul-2015

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