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Assuming the deposit would be hed

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Question;1. Assuming the deposit would be hedged with a forward contract;what would be the effective return from depositing funds in an;Argentine peso (ARS) bank account at 12% p.a. when the spot rate is;ARS/USD 8.0386 and the twelve-month forward rate is ARS/USD 7.9681? Please;present your answer as a percentage, rounded to two decimal points, e.g.;4.56%.;2. Calculate the U.S. dollar-based percentage return or loss;(rounded to two decimal points, e.g., 4.56%) of an American investor who bought;common stock in a Dutch company at EUR 50 per share one year ago and just sold;it at EUR 52 per share. The spot exchange rate one year ago was USD/EUR 1.3663;and the spot rate now is USD/EUR 1.2950.;3. Rodgers International just purchased a Swiss company for;1,000,000 Swiss francs. The spot exchange rate is USD/CHF 1.1152. The nominal;interest in Switzerland is expected to be 12% next year and in the U.S. it is;expected to be 4%. Rodgers believes it will be able to sell the company after;one year for 1,250,000 Swiss francs. Assuming that the exchange rate will;adjust according to the International Fisher equation and that the company uses;a 18% discount rate for capital budgeting projects, what is the net present;value of this investment?;4. Calculate the U.S. dollar-based percentage return or loss;(rounded to two decimal points, e.g., 4.56%) of an American investor who bought;common stock in a Brazilian company at BRL 150 per share one year ago and just;sold it at BRL 144 per share. The spot exchange rate one year ago was BRL/USD;2.4137 and the spot rate now is BRL/USD 2.2530.;5. What would be the expected effective cost of financing if;you could borrow Hungarian forints (HUF) at 6% p.a. but expect the;forint to appreciate by 5% over the next year? Please present your answer;as a percentage, rounded to two decimal points, e.g., 4.56%.;6. Calculate the U.S. dollar-based percentage return or loss;(rounded to two decimal points, e.g., 4.56%) of an American investor who bought;common stock in a Brazilian company at BRL 100 per share one year ago and;just sold it at BRL 95 per share. The spot exchange rate one year ago was;BRL/USD 2.4137 and the spot rate now is BRL/USD 2.3809.;7. Calculate the U.S. dollar-based percentage return or loss;(rounded to two decimal points, e.g., 4.56%) of an American investor who bought;common stock in a Dutch company at EUR 40 per share one year ago and just;sold it at EUR 44 per share. The spot exchange rate one year ago was;USD/EUR 1.3663 and the spot rate now is USD/EUR 1.3351.;8. Assuming the deposit would be hedged with a forward;contract, what would be the effective return from depositing funds in a British;pound (GBP) bank account at 7% p.a. when the spot rate is USD/GBP 1.6518;and the twelve-month forward rate is USD/GBP 1.6667? Please present your answer;as a percentage, rounded to two decimal points, e.g., 4.56%.;9. What would be the expected effective cost of financing if;you could borrow Hungarian forints (HUF) at 12% p.a. but expect the forint to;depreciate by 6% over the next year? Please present your answer as a;percentage, rounded to two decimal points, e.g., 4.56%.;10. Rodgers International just purchased a Mexican company;for 1,000,000 Mexican pesos. The spot exchange rate is MXN/USD 13.5135. The;nominal interest in Mexico is expected to be 10% next year and in the U.S. it;is expected to be 6%. Rodgers believes it will be able to sell the company;after one year for 1,200,000 Mexican pesos. Assuming that the exchange rate;will adjust according to the International Fisher equation and that the company;uses an 14% discount rate for capital budgeting projects, what is the net;present value of this investment?;11. What would be the expected effective cost of financing if;you could borrow British pounds (GBP) at 5% p.a. but expect the pound to;appreciate by 6% over the next year? Please present your answer as a;percentage, rounded to two decimal points, e.g., 4.56%.;12. Assuming the deposit would be hedged with a forward;contract, what would be the effective return from depositing funds in a Swiss;franc (CHF) bank account at 8% p.a. when the spot rate is USD/CHF 1.1152 and;the twelve-month forward rate is USD/CHF 1.0989? Please present your answer as;a percentage, rounded to two decimal points, e.g., 4.56%.;13. Rodgers International just purchased a Brazilian company;for 1,000,000 Brazilian real. The spot exchange rate is BRL/USD 2.4137. The;nominal interest in Brazil is expected to be 16% next year and in the U.S.;it is expected to be 6%. Rodgers believes it will be able to sell the company;after one year for 1,250,000 Brazilian real. Assuming that the exchange rate;will adjust according to the International Fisher equation and that the company;uses an 18% discount rate for capital budgeting projects, what is the net;present value of this investment?;14. What would be the expected effective cost of financing if;you could borrow Swiss francs (CHF) at 8% p.a. but expect the;franc to depreciate by 3% over the next year? Please present your answer;as a percentage, rounded to two decimal points, e.g., 4.56%.;15. Assuming the deposit would be hedged with a forward;contract, what would be the effective return from depositing funds in a Mexican;peso (MXN) bank account at 10% p.a. when the spot rate is MXN/USD 13.5135 and;the twelve-month forward rate is MXN/USD 13.7174? Please present your answer as;a percentage, rounded to two decimal points, e.g., 4.56%;16. Rodgers International just purchased a French company for;1,000,000 euros. The spot exchange rate is USD/EUR 1.3663. The nominal interest;in France is expected to be 9% next year and in the U.S. it is expected to be;4%. Rodgers believes it will be able to sell the company after one year for;1,200,000 euros. Assuming that the exchange rate will adjust according to the;International Fisher equation and that the company uses a 14% discount rate for;capital budgeting projects, what is the net present value of this investment?

 

Paper#53017 | Written in 18-Jul-2015

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