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Would exchange rate changes always increase the risk of foreign investment? Discuss the condition under which exchange rate changes may actually reduce the risk of foreign investment.
Explain how exchange rate fluctuations affect the return from a foreign market measured in dollar terms. Discuss the empirical evidence on the effect of exchange rate uncertainty on the risk of for
Prepare a ranking of the three countries in terms of expected currency return premiums from the perspective of a U.S. investor. Show your calculations.
The exchange rate was 95 yen per dollar at the time. Mr. Jorus, who is the manager of a Bermudabased hedge fund, thought that the substantial interest advantage associated with investing in the Unit
Describe the behavior of cross-country equity return correlations to which the consultants is referring.
Japan Life Insurance Company invested $10,000,000 in pure-discount U.S. bonds in May 1995 when the exchange rate was 80 yen per dollar.
Discuss how the advent of the euro would affect international diversification strategies.
Mr. Silber received SF120 as a cash dividend immediately before the share was sold. Compute the rate of return on this investment in terms of U.S. dollars.
Discuss and compare hedging transaction exposure using the forward contract vs. money market instruments. When do the alternative hedging approaches produce the same result?
If an investor purchased one of these bonds on March 1, 2008, determine the yield to maturity if the investor paid $1,050 for the bond.
How would you define transaction exposure? How is it different from economic exposure?
What is the expected gain/loss from the forward hedging? If you were the financial manager of Cray Research, would you recommend hedging this euro receivable? Why or why not?
Moore is 100% equity financed, and it faces a 40% tax rate. What is the company's net income? what is its net cash flow?
Explain cross-hedging and discuss the factors determining its effectiveness.
Explain contingent exposure and discuss the advantages of using currency options to manage this type of currency exposure.
New generation public utilities issued a bond with a $1,000 par value the pays $80 in annual interest. It matures in 20 years. your required rate of return is 7 percent. calculate the value of the
Determine the current market prices of the following $1,000 bonds if the comparable rate is 10% and answer the following questions.
You purchase a bond for $875. It pays $80 a year (that is, the semiannual coupon is 4%), and the bond matures after 10 years. What is the yield to maturity?
If investors require a rate of return equal to 12 percent on similar-risk bonds and interest is paid semiannually, what should be the market price of Buner's bond?
Ralf Rafferty purchased Gold Depot at the beginning of January for $25 per share. At that time, the stock was selling for $27.50 per share. What is Ralph's return on his investment for the year?
Recent surveys of corporate exchange risk management practices indicate that many U.S. firms simply do not hedge. How would you explain this result?
What is the yield to maturity on a 10-year, 9 percent annual coupon, $1,000 par value bond that sells for $887.00? That sells for $1,134.20?
The required rate of return on these projects is 11%. What is each project's payback period?
Based on the progression of changes, how banks are able to adjust their asset portfolios and evaluate whether or not a bank can simultaneously maximize return and minimize default risk?
When terminating a project for capital budgeting purposees, the working capital outlay required at the initiation of the project will?