Your Perfect Assignment is Just a Click Away

We Write Custom Academic Papers

100% Original, Plagiarism Free, Customized to your instructions!

glass
pen
clip
papers
heaphones

FIN31FMS12019 Incompatible Trinity Finance Questions

FIN31FMS12019 Incompatible Trinity Finance Questions

FIN31FMS12019 Incompatible Trinity Finance Questions

short answers Q&A format
For calculation questions, show all workings.
Question 1
Suppose Mexico is a major export market for your U.S.-based company and the Mexican peso appreciates drastically against the U.S. dollar. Discuss its implications for your company and for Mexican companies that export to the U.S.
Question 2
In the 1850s the French franc was valued by both gold and silver, under the official French ratio which equated a gold franc to a silver franc 15½ times as heavy. At the same time, the gold from newly discovered mines in California poured into the market, depressing the value of gold. Discuss what would happen to the franc in this case.
Question 3
Suppose that the pound is pegged to gold at £20 per ounce and the dollar is pegged to gold at $35 per ounce. This implies an exchange rate of $1.75 per pound. If the current market exchange rate is $1.80 per pound, how would you take advantage of this situation?
Question 4
What is meant by the Incompatible Trinity? Illustrate your answer with an example of a fixed currency exchange regime and an example of a floating currency exchange regime.
Question 5
When a country’s currency depreciates against the currencies of its major trade partners, its trade balance often worsens in the short run before it starts to improve. This leads to a J curve in the trade balance. Illustrate the J curve graphically. Fully label your diagram (note: you are welcome to draw it by hand, take a photo and attach it here). Explain why the J curve happens.
Question 6
Use the table below to answer the following questions:
American Terms
European Terms
Bank A’s Quotations
Bid
Ask
Bid
Ask
British pounds
$
1.9712
$
1.9717
£
0.5072
£
0.5073
Euros
$
1.4738
$
1.4742
‚¬
0.6783
‚¬
0.6785
What is ?
What is ?
Suppose Bank B provides a quote of GBP 0.7462-68 for the EUR. Demonstrate whether and how an arbitrage profit can be made.
Question 7
You are a U.S.-based treasurer with $1,000,000 to invest. The dollar-euro exchange rate is quoted as $1.50 = ‚¬1.00 and the dollar-pound exchange rate is quoted at $2.00 = £1.00. If a bank quotes you a cross rate of £1.00 = ‚¬1.25, is there an arbitrage opportunity? If so, how much money would you make? Show all workings.
Question 8
A bank is quoting the following exchange rates against the dollar for the Swiss franc and the Australian dollar:
SFr/$ = 1.5958–70
A$/$ = 1.7249–58
An Australian firm asks the bank for an A$/SFr quote.What cross-rate would the bank quote?
Question 9
Explain the differences between a long forward position and a short forward position. In your answer, illustrate the pay-off functions of these positions with graphs. Fully label your graphs. (note: you are welcome to draw them by hand, take a photo and attach it here)
Question 10
Suppose IBM has a liability of £1,000,000, payable in three months. The company wants to hedge foreign exchange risk using forward contracts. The current spot rate for the £ is $1.2415/£, and the three-month forward rate is $1.2492/£.
What forward position should IBM enter into?
Suppose the spot exchange rate in three months’ time is either $1.2342/£ or $1.2547/£. Using this example, demonstrate how the forward contract in part i helps IBM eliminates foreign exchange risk exposure.

“Place your order now for a similar assignment and have exceptional work written by our team of experts, guaranteeing you A results.”
Attachments
20190410085254fin3ifm_homework_1 (23 kB)

Order Solution Now

Our Service Charter

1. Professional & Expert Writers: Homework Discussion only hires the best. Our writers are specially selected and recruited, after which they undergo further training to perfect their skills for specialization purposes. Moreover, our writers are holders of masters and Ph.D. degrees. They have impressive academic records, besides being native English speakers.

2. Top Quality Papers: Our customers are always guaranteed of papers that exceed their expectations. All our writers have +5 years of experience. This implies that all papers are written by individuals who are experts in their fields. In addition, the quality team reviews all the papers before sending them to the customers.

3. Plagiarism-Free Papers: All papers provided by Homework Discussion are written from scratch. Appropriate referencing and citation of key information are followed. Plagiarism checkers are used by the Quality assurance team and our editors just to double-check that there are no instances of plagiarism.

4. Timely Delivery: Time wasted is equivalent to a failed dedication and commitment. Homework Discussion is known for timely delivery of any pending customer orders. Customers are well informed of the progress of their papers to ensure they keep track of what the writer is providing before the final draft is sent for grading.

5. Affordable Prices: Our prices are fairly structured to fit in all groups. Any customer willing to place their assignments with us can do so at very affordable prices. In addition, our customers enjoy regular discounts and bonuses.

6. 24/7 Customer Support: At Homework Discussion, we have put in place a team of experts who answer to all customer inquiries promptly. The best part is the ever-availability of the team. Customers can make inquiries anytime.