International Business Administration SIB675 Lecture Notes - Lecture 1: Mexican Peso, United States Dollar, Canadian Dollar
16 Apr 2016
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Internaional finance homework3 chapter 3: exchange rate effects on borrowing. Explain how the appreciation of the japanese yen against the. U. s. dollar would affect the return to a u. s. firm that borrowed japanese yen and used the proceeds for a u. s. project. Thus, it is adversely affected by the appreciation. Its cost of borrowing will be higher as a result of this appreciation: bid/ask spread. Compute the bid/ask percentage spread for mexican peso retail transactions in which the ask rate is $. 11 and the bid rate is $. 10. Answer: [($. 11 $. 10)/$. 11] = . 091, or 9. 1%: forward contract. The wolfpack corporation is a u. s. exporter that invoices its exports to the. Answer: the forward contract can hedge future receivables or payables in foreign currencies to insulate the firm against exchange rate risk. Yet, in this case, the wolfpack corporation should not hedge because it would benefit from appreciation of the pound when it converts the pounds to dollars: indirect exchange rate.
