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IBM purchased computer chips from NEC, a Japanese electronics concern, and was billed ¥250 million payable in three months. Currently, the spot exchange rate is ¥111/$ and the three-month forward rate is ¥107/$. The three-month money market interest rate is 8 percent per annum in the U.S. and 6 percent per annum in Japan. (“per annum” means annualized) The management of IBM decided to use the money market hedge to deal with this yen accounts payable. (Remember to convert the annualized interest rates to 3 month rates assuming a 360 day year.)
(a) Explain the process of a money market hedge and compute the dollar cost of meeting the yen obligation in 3 months.
Compute the incremental profit Electron Control would earn by customizing its instruments and marketing directly to end users.
Resource price differentials that do not trigger the reallocation of resources are known as
In the Cutler, Glaeser and Shapiro paper entitled why have Americans become more obese? Name four testable implications that the proposed theory has for food consumption? and any solution for this problem?
When the price of a cruise rises from $19,500 to 20,500, the quantity demanded decreases from $2,100 to 1,900 travelers. Use this information to calculate the price elasticity of demand for cruises. The price of a cruise increased by-------percent. T..
Assume that the following asset values (in millions of dollars) exist in Ironmania: Federal Reserve Notes in circulation = $700; Money market mutual funds (MMMFs) held by individuals = $400; Corporate bonds = $300; Iron ore deposits = $50; Currency i..
Farmer Purple wishes to choose the most cost-effective way of harvesting his quinoa crop. Purple has three choices of combinations of differing amounts of machinery and labor. The table to the right shows the three production technologies.
Find the quantity that maximizes the profit of the monopolist, the profit of the monopolist and the corresponding domestic and international price.
Constrained Optimization in Economics 2. Minimize costs for a firm with a cost function Subject to the production quota
The World Bank projects that the world's population will increase from 7 billion to 8 billion in 2025. World output today is roughly $80 trillion. What is global per capita income today? What will per capita income be in 2025 if the world's economy d..
Suppose Dana quits her job as a lawyer, where she made $6500 per month, to open an ice cream shop. Suppose that Dana has revenue of $20,000 per month. Her monthly explicit costs are shown below. Is Dana earning an accounting profit? Is she earning an..
Using the supply and demand analysis of the market for reserves, indicate what happen to the federal funds rate under the following situations: The Treasury has just paid a large bill to defense contractors and as a result its deposits with the Fed f..
On what documents (and where) would a sale of some of your company's equipment for cash appear?
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