User Account

All Pages

How much money would your bank loss or gain

Assignment Help Corporate Finance
Reference no: EM13836519

Question 1:

Suppose you work for XYZ Land-Citicorp in XYZ Land. A local bank wanted to buy USD50,000,000 three month forward. Since you think XYZ Land is a very risky environment you need to build 10% margin (annual) in your forward price to account for risk. Current spot and interest rates in USD and XYZ Land Lira are as follows.

What would be your forward quote?

XYZ currency/USD 685-700
RUSD: 7.50-8.50 p.a.
RXYZL: 35.00-45.00% p.a.

Question 2:

Use the following spot and interest rates to answer the following question:

USD/EURO 1.2310-1.2340

R-USD-3-months: 3.00%-3.25% pa

R-EUR-3-months: 4.00%-4.50% pa

Assume that you are a banker and you bought Eur100m forward based on the forward price calculated from rates available above. However, after you entered into the contract, you did not engage in the series of transactions that you supposed to (in order to create a risk free position).

In other words, you have a net exposure of EUR100m. Suddenly three months later Fed dramatically increased interest rates, which pushed the reference rates up by 2% in US. In response to interest rate hike, USD/EUR rate also moved down to: USD/EUR1.2050-1.2090. Concerned about further movements in the interest and exchange rates, you completed the loop by borrowing in Euros, converting them into USD and depositing dollars into an interest earning account (all with 9 months maturity).

What would be your net loss or gain with these sharp movements in interest rates, how much money would your bank loss or gain because of the forward contract you quoted based on the given rate?

Question 3:

A US company expects SFR120m cash flow 12 months from now. However the exact amount may vary +/-20%. Company develops an analysis to decide on the best hedging strategy.

They forecast that spot exchange rate can be either SFR1.2030 , 1.375 or 1.5470. They consider selling SFR 96m forward @1.375 and buying SFR48m put option @ strike price SFR1.375/$. They pay $0.0345 per SFR. Assume that actual cash flows turned out to be SFR120m. Calculate the net USD receipts if spot rate is SFR 1.5470/USD

Reference no: EM13836519

Questions Cloud

Create a digital poster : Your goals are to create a one page digital poster that includes three leadership and motivation themes identified from this week's readings and your experiences, including a one-sentence explanation of each selected theme, and stating the ways le..
Wavelength separation of the two fine structure : What is the wavelength separation of the two fine structure lines that arise from transitions between the first excited state and the ground state?
Naeyc developmentally appropriate approaches : NAEYC developmentally appropriate approaches
Comprehensive overview of the wto and the wto website : Begin by viewing the Written Transcript which gives you a comprehensive overview of the WTO and the WTO website. Then chose one of the various topics covered by the WTO, such as anti-dumping, TRIPS, etc. any topic of interest to you and give the c..
How much money would your bank loss or gain : What would be your net loss or gain with these sharp movements in interest rates, how much money would your bank loss or gain because of the forward contract you quoted based on the given rate?
Does a moral realist have to be a transcendental moralist : Does a moral realist have to be a transcendental moralist
Critically analyse clinical management of your case study : Critically analyse the clinical management of your case study. It is designed to provide you with an opportunity to demonstrate your ability to apply knowledge and clinical judgement to manage a complex clinical situation.
Describes how the capital and labor inputs are transformed : Describes how the capital and labor inputs are transformed into output - The capital evolution equation - shows that net additions to K arise when investment exceed capital depreciation.
Describe a situation in which taking a moderate position : Describe a situation in which taking a moderate position

Reviews

Write a Review

Corporate Finance Questions & Answers

  Time value of money involves calculation yield to maturity

time value of money involves calculation yield to maturity and yield to calleddies bar and restaurant supplies expects

  Most publicly traded corporations are required to submit

most publicly traded corporations are required to submit 10q quarterly and 10k annual reports to the sec detailing

  Make a graph of utility function

Suppose a person with the utility function over wealth where e is the exponential function and w is equal to wealth in hundreds of thousands of dollars.

  Calculation of adjusted return on assets and after tax cost

calculation of adjusted return on assets and after tax cost of debtall questions relate to the kimberly-clark corp.

  Computing the value of stock price

Computing the value of stock price with discounting the future discounts - how much must preferred stockholders be paid prior to paying dividends to common stockholders?

  Questions based on ratio analysis

Questions based on Ratio analysis, Standard deviation, and SWOT analysis - International trade occurs primarily because of relative price difference among nations.

  Purchase of siebel systems

For reason of this exercise, suppose that you are manager of a mutual fund specialized in business bonds. Your customers are mostly 45 and older, risk-averse, long-term investors.

  Evaluation of sum of values of pure business flows

Evaluation of Sum of values of pure business flows and financing effect - Financing flows should be discounted at the rate of return required by the providers of debt.

  Determine the beta of the stock of hsbc

Explain whether a risky asset could have a zero beta or negative beta and discuss the expected return on such an asset and  Suppose HSBC has an expected return of 15%, the risk-free rate is 3%, and the market risk premium is 10%. Determine the beta ..

  Discuss the major categories of cost

How and why do we classify cost, discuss the major categories of cost and explain each. Give examples of each and what is the difference between controllable and uncontrollable cost, give an example of each.

  Consider a small private airport database that is used to

consider a small private airport database that is used to keep track of airplanes their owners airport employees and

  Gapenskis fundamentals of health care finance

what per visit price must be set for the service to break even? What price must be set to earn an annual profit of $100,000 and repeat part A, but assume that the variable cost per visit is $10.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd