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Use currency derivatives to speculate or hedge in the foreign exchange market to solve the following problems:
Problem 1:
An investor wishes to buy euros spot (at $0.9080) and sell euros forward for 180 days (at $0.9146).
a. What is the swap rate on euros?
b. What is the forward premium or discount on 180-day euros?
Problem 2:
Suppose the euro is quoted at 0.7064-80 in London and the pound sterling is quoted at 1.6244-59 in Frankfurt.
a. Is there a profitable arbitrage situation? Describe it.
b. Compute the percentage bid-ask spreads on the pound and euro.
The statement of changes in retained earnings for the year shows:
Using the companies selected for the Review of Financial Statements Paper, make a summary comparing the companies two most recent fiscal years based on;
On July 1, 2009, Houghton Company borrowed 200,000 euros from a foreign lender evidenced by an interest-bearing note due on July 1, 2010. The note is denominated in euros.
Case Study: The following capital structure is taken from Bata Boots Co. balance sheet for the fiscal year ended April 30, 2005. This is considered the firm’s optimal capital structure.
AR store issued 15 year bonds one year ago at a coupon rate of 6.1 percent. The bonds make semi-annual payments. If the YTM on these bonds is 5.3 percent, calculate the current bond price?
When company acquires another company, when divisions merge, or when corporations merge, what are some of potential problems will they face with the management and integration of their respective technology and data processing systems?
Determine the firm’s expected free cash flow to equity (FCFE) per share next year under these suppositions?
An analytical income statement for Detroit Heat Treating is given below. It is based on an output (sales) level of 40,000 units.
What are the primary economic indicators that you would use if you were thinking about making a large purchase and needed a loan? For example, you may consider a new house, car, or new capital for a business?
Jean Cleveland currently has $5,750 in a money market account paying 5.65 percent compounded semi-annually. How much should she invest in money market account semi-annually over the next five years to achieve this target?
Find out the value of share of firm's stock when the firm is expected to pay $2.80 per share dividend at the end of each year and annual discount rate is 7.5 percent?
Firm x has a target capital structure of 40% debt and 60 percent common equity, with no preferred stock. The yield to maturity on the firm's outstanding bonds is 9.96%.
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