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What was Mike’s net profit on the call option 1. Speculating with Currency Put Options. Alice Duever purchased a put option on British pounds for $.04 per unit. The strike price was $1.80 and the spot rate at the time the pound option was exercised was $1.59. Assume there are 31,250 units in a British pound option. What was Alice’s net profit on the option? 2. Selling Currency Call Options. Mike Suerth sold a call option ...

Other / Other 23 Apr 2016

Provide the rationale for its possible existence 1. Effects of September 11. The terrorist attack on the U.S. on September 11, 2001 caused expectations of a weaker U.S. economy. Explain how such expectations could have affected U.S. interest rates, and therefore have affected the forward rate premium (or discount) on various foreign currencies. 2. Interest Rate Parity. Explain the concept of interest rate parity. Provide the rationale ...

Other / Other 23 Apr 2016

Speculating with Currency Put Options 1. Speculating with Currency Call Options. Bama Corp. has sold British pound call options for specula-tive purposes. The option premium was $.06 per unit, and the exercise price was $1.58. Bama will purchase the pounds on the day the options are exercised (if the options are exer¬cised) in order to fulfill its obligation. In the following table, fill in the net profit (or loss) to Bama Corp. if the ...

Other / Other 23 Apr 2016

Explain why PPP does not hold 1. Limitations of PPP. Explain why PPP does not hold . 2. PPP Applied to the Euro. Assume that several European countries that use the euro as their currency experience higher inflation than the United States, while two other European countries that use the euro as their currency experience lower inflation than the United States. According to PPP, how will the euro’s value against the dollar be affect ...

Other / Other 23 Apr 2016

How can currency futures be used by corporations 1. Using Currency Futures. a. How can currency futures be used by corporations ? b. How can currency futures be used by speculators? 2. Currency Options. Differentiate between a currency call option and a currency put option. Business Management Assignment Help, Business Management Homework help, Business Management Study Help, Business Management Course Help ...

Other / Other 23 Apr 2016

Compare and contrast transaction exposure and economic exposure 1. Transaction versus Economic Exposure . Compare and contrast transaction exposure and economic exposure. Why would an MNC consider examining only its “net” cash flows in each currency when assessing its transaction exposure? 2. Factors That Affect a Firm’s Transaction Exposure. What factors affect a firm’s degree of transaction expo¬sure in a p ...

Other / Other 23 Apr 2016

Do you think the acquisition of a foreign firm 1. International Opportunities. a. Do you think the acquisition of a foreign firm or licensing will result in greater growth for an MNC? Which alternative is likely to have more risk? b. Describe a scenario in which the size of a corporation is not affected by access to international opportunities. c. Explain why MNCs such as Coca Cola and PepsiCo, Inc., still have numerous oppor ...

Other / Other 23 Apr 2016

Aggregate Effects on Exchange Rates 1. Aggregate Effects on Exchange Rates. Assume that the United States invests heavily in government and corporate securities of Country K. In addition, residents of Country K invest heavily in the United States. Approxi¬mately $10 billion worth of investment transactions occur between these two countries each year. The total dollar value of trade transactions per year is about $8 million. This informati ...

Other / Other 23 Apr 2016

Cost of Foreign Debt Versus Equity 1. Financing Tradeoffs. Pullman, Inc., a U.S. firm, has been highly profitable, but prefers not to pay out higher dividends because its shareholders want the funds to be reinvested. It plans for large growth in several less developed countries. Pullman would like to finance the growth with local debt in the host countries of concern to reduce its exposure to country risk. Explain the dilemma faced by Pull ...

Other / Other 23 Apr 2016

Explain how the Asian crisis would have affected the returns to a U.S. firm 1. International Diversification. Explain how the Asian crisis would have affected the returns to a U.S. firm investing in the Asian stock markets as a means of international diversification. 2. Foreign Exchange. You just came back from Canada, where the Canadian dollar was worth $.70. You still have C$200 from your trip and could exchange them for dollars at th ...

Other / Other 23 Apr 2016