Exchange rate risk: - 3903

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Exchange rate risk:

a.arises from the fact that the spot exchange rate on a future date is a random variable.

b.applies only to certain types of international businesses.

c.has been phased out due to recent international legislation.

d.both a and b.

 

 

 

 

 

 

 

 

 

Use the following information to answer questions 46-47. Below is an excerpt from Table 22-1, The Globalization of Product and Financial Markets, that appears in your text. Values are foreign exchange rates reported in The Wall Street Journal.

U.S. $ equivalent  Currency per U.S. $

          Country              Mon.                    Mon.

          India (Rupee)        0.03137                  31.88

          Britain (Pound)      1.5615

          30-day Forward    1.5609

          90-day Forward    1.5605

          180-day Forward  1.5603

          Canada (Dollar)    0.7265                      1.3765

          30-day Forward    0.7256                    1.3782

          90-day Forward    0.7236                   1.3820

          180-day Forward0.7196                      1.3896

          Sweden (Koruna)  0.18848                    5.3055

          30-day Forward    0.18829                    5.3110

          90-day Forward    0.18809                    5.3167

          180-day Forward  0.187955.3205

 
Solution Description

Exchange rate risk:

          a.   arises from the fact that the spot exchange rate on a future date is a random variable.

          b.   applies only to certain types of international businesses.

          c.   has been phased out due to recent international legislation.

          d.   both a and b.