Name: _________________________________________ Instructions: The exam is composed of ten problems. Make sure you have all pages in your exam. Including this cover page‚ you should have ten pages. Each problem has its own set of instructions. You may use abbreviations for labels to save time. Unclear responses will receive 0 points. Partial credit will be awarded. If you need additional space for your answer‚ use the back of the page. Problem 1 5 Points Mint Corporation
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annualized return. In the United States‚ 90-day securities have a 4% annualized return and 180-day securities have an annualized return of 4.5%. All securities are of equal risk‚ and Japanese securities are denominated in terms of the Japanese yen. Assuming that interest rate parity holds in all markets‚ which of the following statements is most CORRECT? a. The yen-dollar spot exchange rate equals the yen-dollar exchange rate in the 90-day forward market. b. The yen-dollar spot exchange rate
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exchange rate United States dollar. Why should be like that ...?‚ Because the true United States Dollar is currently an international currency. Even information says all the countries that exist in the world save its foreign exchange reserves in the form of dollars. So that’s not surprising almost everyone in the world want to accept dollars‚ meaning dollar is believed as a means of payment around the world. To note‚ although the universe is not only the United States that use the dollar‚ but only the
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have to make in 1993? Why was the decision important? 2. History of Japanese Yen. Describe the historical exchange rates between Japanese Yen and U.S. dollar over time. Focus on the big changes and what was the exchange rate in (and years before) July 1993. 3. To Hedge or Not? Do you think Tiffany should actively manage its yen-dollar exchange rate risk? Why or why not? Explain the benefits and costs of hedging. 4. What to Hedge? If Tiffany were to manage its exchange rate risk‚ then
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objectives should be to minimize foreign exchange rate risk and lower counterparty risks. We want to minimize these risks because Tiffany & Co. is selling goods that are denominated in US dollars‚ but sold for yen in the Japanese market. The objective of this program is to prevent the depreciation of the yen against the US dollar by hedging the currency. The expected Japanese sales of Tiffany & Co. should be actively managed by purchasing hedging contracts continuously on expiration of previous contract.
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will appear equally attractive to both companies. Q.2. Company X wishes to borrow U.S. dollars at a fixed rate of interest. Company Y wishes to borrow Japanese yen at a fixed rate of interest. The amounts required by the two companies are roughly the same at the current exchange rate. The companies have been quoted the following interest rates‚ which have been adjusted for the impact of taxes: Yen Dollars Company X 5.0% 9.6% Company Y 6.5% 10.0% Design a swap that will net a bank‚ acting
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Weak Dollar vs. Strong Dollar With the economy constantly changing‚ we are starting to see drastic changes in our dollar. A countries currency determines their strength in the market and their inflation rate. With a higher inflation rate‚ they are able to buy more and do more for a cheaper price. To help us better understand the difference between the weak dollar and the strong dollar‚ we will go in depth with both weak and strong dollars and its advantages and disadvantages‚ the currency monitor
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Question 2 a) A fall in the value of the Australian dollar (AUD) against the U.S. dollar (USD) benefit Billabong in two folds‚ strengthened price competitiveness and translation advantage. Firstly‚ the Americas segment accounts for about 50% of Billabong’s sales revenue in 2008 and 2009. (Appx.1) In case of depreciation of AUD against USD‚ the price of imported surfwear to the U.S. in terms of USD will decrease. The US importers demand more for Billabong’s products. The sales increases from the
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"Give me control of a nation’s money and I care not who makes it’s laws" -Mayer Amschel Bauer Rothschild. Rothschild makes a great point; the people of the United States have zero effect on their own currency. Not even the government has control over the production and distribution of its own currency. That control was given to banks and a private corporation named the Federal Reserve . These private institutions have created a cycle that enriches them and indebts the public. This vicious cycle
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U.S. Dollar Adopted by the United States on July 6‚ 1785‚[3] the U.S. dollar is the currency most used in international transactions.[4] Several countries use the U.S. dollar as their official cur- rency‚ and many others allow it to be used in a de facto capacity. In 1995‚ over US $380 billion were in circulation‚ two-thirds of which was outside the United States. By 2005‚ that figure had doubled to nearly $760 billion‚ with an estimated half to two-thirds being held overseas‚[5] representing an
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