Discuss the below:
Q1. An American business needs to pay (a) 15,000 Canadian dollars, (b) 1.5 million yen,and (c) 55,000 Swiss francs to businesses abroad. What are the dollar payments to the respective countries?
Q2. An American business pays $20,000, $5,000, and $15,000 to suppliers in, respectively, Japan, Switzerland, and Canada. How much, in local currencies, do the suppliers receive?
Q3. Compute the indirect quote for the spot and forward Canadian dollar, Japanese Yen, and Swiss franc contracts.
Q4. You are considering a security with the following possible rates of return:Calculate the expected rate of return and the standard deviation of the returns.
|
Probability
|
Return (%)
|
|
0.30
|
9.5
|
|
0.15
|
12.0
|
|
0.25
|
15.0
|
|
0.30
|
16.0
|
COUNTRY CONTRACT $/FOREIGN CURRENCY
Canada-dollar Spot .8437
30-day .8417
90-day .8395
Japan-yen Spot .004684
30-day .004717
90-day .004781
Switzerland-franc Spot .5139
30-day .5169
90-day .5315
Q5: Calculate the expected rate of return and its standard deviation. One year Treasury bills are currently paying 8.9%. Should you invest in the above security?
|
Probability
|
Return (%)
|
|
0.15
|
6
|
|
0.30
|
5
|
|
0.40
|
11
|
|
0.15
|
14
|
Q6: GAC Manufacturing, Inc. is considering several investments. The rate on T-Bills is currently 6.75 percent, and the expected return for the market is 12 percent. What should be the required rates of return for each investment (Using the CAPM)?
Security Beta
A 1.40
B 0.75
C 0.80
D 1.20