1. Assuming the deposit would be hedged with a forward contract,
what would be the effective return from depositing funds in an
Argentine peso (ARS) bank account at 12% p.a. when the spot rate is
ARS/USD 8.0386 and the twelve-month forward rate is ARS/USD 7.9681? Please
present your answer as a percentage, rounded to two decimal points, e.g.,
4.56%.
2. Calculate the U.S. dollar-based percentage return or loss
(rounded to two decimal points, e.g., 4.56%) of an American investor who bought
common stock in a Dutch company at EUR 50 per share one year ago and just sold
it at EUR 52 per share. The spot exchange rate one year ago was USD/EUR 1.3663
and the spot rate now is USD/EUR 1.2950.
3. Rodgers International just purchased a Swiss company for
1,000,000 Swiss francs. The spot exchange rate is USD/CHF 1.1152. The nominal
interest in Switzerland is expected to be 12% next year and in the U.S. it is
expected to be 4%. Rodgers believes it will be able to sell the company after
one year for 1,250,000 Swiss francs. Assuming that the exchange rate will
adjust according to the International Fisher equation and that the company uses
a 18% discount rate for capital budgeting projects, what is the net present
value of this investment?
4. Calculate the U.S. dollar-based percentage return or loss
(rounded to two decimal points, e.g., 4.56%) of an American investor who bought
common stock in a Brazilian company at BRL 150 per share one year ago and just
sold it at BRL 144 per share. The spot exchange rate one year ago was BRL/USD
2.4137 and the spot rate now is BRL/USD 2.2530.
5. What would be the expected effective cost of financing if
you could borrow Hungarian forints (HUF) at 6% p.a. but expect the
forint to appreciate by 5% over the next year? Please present your answer
as a percentage, rounded to two decimal points, e.g., 4.56%.
6. Calculate the U.S. dollar-based percentage return or loss
(rounded to two decimal points, e.g., 4.56%) of an American investor who bought
common stock in a Brazilian company at BRL 100 per share one year ago and
just sold it at BRL 95 per share. The spot exchange rate one year ago was
BRL/USD 2.4137 and the spot rate now is BRL/USD 2.3809.
7. Calculate the U.S. dollar-based percentage return or loss
(rounded to two decimal points, e.g., 4.56%) of an American investor who bought
common stock in a Dutch company at EUR 40 per share one year ago and just
sold it at EUR 44 per share. The spot exchange rate one year ago was
USD/EUR 1.3663 and the spot rate now is USD/EUR 1.3351.
8. Assuming the deposit would be hedged with a forward
contract, what would be the effective return from depositing funds in a British
pound (GBP) bank account at 7% p.a. when the spot rate is USD/GBP 1.6518
and the twelve-month forward rate is USD/GBP 1.6667? Please present your answer
as a percentage, rounded to two decimal points, e.g., 4.56%.
9. What would be the expected effective cost of financing if
you could borrow Hungarian forints (HUF) at 12% p.a. but expect the forint to
depreciate by 6% over the next year? Please present your answer as a
percentage, rounded to two decimal points, e.g., 4.56%.
10. Rodgers International just purchased a Mexican company
for 1,000,000 Mexican pesos. The spot exchange rate is MXN/USD 13.5135. The
nominal interest in Mexico is expected to be 10% next year and in the U.S. it
is expected to be 6%. Rodgers believes it will be able to sell the company
after one year for 1,200,000 Mexican pesos. Assuming that the exchange rate
will adjust according to the International Fisher equation and that the company
uses an 14% discount rate for capital budgeting projects, what is the net
present value of this investment?
11. What would be the expected effective cost of financing if
you could borrow British pounds (GBP) at 5% p.a. but expect the pound to
appreciate by 6% over the next year? Please present your answer as a
percentage, rounded to two decimal points, e.g., 4.56%.
12. Assuming the deposit would be hedged with a forward
contract, what would be the effective return from depositing funds in a Swiss
franc (CHF) bank account at 8% p.a. when the spot rate is USD/CHF 1.1152 and
the twelve-month forward rate is USD/CHF 1.0989? Please present your answer as
a percentage, rounded to two decimal points, e.g., 4.56%.
13. Rodgers International just purchased a Brazilian company
for 1,000,000 Brazilian real. The spot exchange rate is BRL/USD 2.4137. The
nominal interest in Brazil is expected to be 16% next year and in the U.S.
it is expected to be 6%. Rodgers believes it will be able to sell the company
after one year for 1,250,000 Brazilian real. Assuming that the exchange rate
will adjust according to the International Fisher equation and that the company
uses an 18% discount rate for capital budgeting projects, what is the net
present value of this investment?
14. What would be the expected effective cost of financing if
you could borrow Swiss francs (CHF) at 8% p.a. but expect the
franc to depreciate by 3% over the next year? Please present your answer
as a percentage, rounded to two decimal points, e.g., 4.56%.
15. Assuming the deposit would be hedged with a forward
contract, what would be the effective return from depositing funds in a Mexican
peso (MXN) bank account at 10% p.a. when the spot rate is MXN/USD 13.5135 and
the twelve-month forward rate is MXN/USD 13.7174? Please present your answer as
a percentage, rounded to two decimal points, e.g., 4.56%
16. Rodgers International just purchased a French company for
1,000,000 euros. The spot exchange rate is USD/EUR 1.3663. The nominal interest
in France is expected to be 9% next year and in the U.S. it is expected to be
4%. Rodgers believes it will be able to sell the company after one year for
1,200,000 euros. Assuming that the exchange rate will adjust according to the
International Fisher equation and that the company uses a 14% discount rate for
capital budgeting projects, what is the net present value of this investment?
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