1. Bae Inc. (a U.S. based firm) negotiates a conditional currency call options with Community Bank to hedge its accounts payable of 3 million Austrailian dollars due on October 31. Bae Inc. will only exercise its option on the due date. The terms of the conditional currency call options are as follows: K (exercise price) = $0.68 per Australian dollar, Trigger = $0.66 per Australian dollar, premium = $0.02 per Australian dollar, expiration date = October 31.

If the spot rate on the due date, i.e., October 31, is $0.65 per Australian dollar, what is the amount of U.S. dollar Bae Inc. expects to pay for its 3 million Australian dollars?

2. Johnson & Johnson, Inc., a U.S.-based MNC, will need 15 million Brazilian Reals on December 1. It is now September 1. Johnson & Johnson has negotiated a non-deliverable forward contract with its bank. The reference rate is the Brazilian Real's closing exchange rate (in $) quoted by Brazil's central bank in 90 days. The Brazilian Real's spot rate today is $.22. If the rate quoted by Brazil's central bank on December 1 is $.26, Johnson will ____ $____.

3. JCrew Inc. (a U.S. based firm) negotiates a conditional currency put options with a bank to hedge its accounts receivable of 2 million euros due on October 31. JCrew Inc. will only exercise its option on the due date. The terms of the conditional currency put options are as follows: K (exercise price) = $1.12 per euro, Trigger = $1.14 per euro, premium = $0.03 per euro, expiration date = October 31.

If the spot rate on the due date, i.e., October 31, is $1.13 per euro, what is the amount of U.S. dollar JCrew expects to receive for its 2 million euros?

4. Trensor Bank believes the Australian dollar (AU$) will appreciate over the next 9 days from $.70 to $.73. The following annual interest rates apply:

Currency Lending Rate Borrowing Rate Dollars 6.73% 7.20% Australian dollar (AU$) 6.80% 7.28%

Trensor Bank has the capacity to borrow either AU$10 million or $7 million. If Trensor Bank's forecast is correct, how shall Trensor Bank implement its speculating trading activities and what will its dollar profit be from speculation over the nine-day period (assuming it does not use any of its existing consumer deposits to capitalize on its expectations)? (30/360 convention used for the interest calculation, i.e., assuming 360 days a year)

Question options:

A. Trensor Bank shall borrow AU$10 million at the annual rate of 7.28% for 9 days, convert AU$10 million to $ at the rate of $0.70/AU$, invest the $ converted at the annual rate of 6.73% for 9 days. Doing so, Trensor Bank will realize the profit of $309,178.25.

B. Trensor Bank shall borrow $7 million at the annual rate of 7.20% for 9 days, convert $7 million to AU$ at the rate of $0.70/AU$, invest the AU$ converted at the annual rate of 6.80% for 9 days. Doing so, Trensor Bank will realize the profit of $308,837.00.00.

C. Trensor Bank shall borrow AU$10 million at the annual rate of 7.28% for 9 days, convert AU$10 million to $ at the rate of $0.70/AU$, invest the $ converted at the annual rate of 6.73 % for 9 days. Doing so, Trensor Bank will realize the profit of $299,542.25.

D. Trensor Bank shall borrow $7 million at the annual rate of 7.20% for 9 days, convert $7 million to AU$ at the rate of $0.70/AU$, invest the AU$ converted at the annual rate of 6.80% for 9 days. Doing so, Trensor Bank will realize the profit of $299,810.00.

5. Brookshire, Inc. (U.S. based MNC) needs to invest ten million Cambodian riels in its Cambodian subsidiary to support local operations today. Brookshire would like its subsidiary to repay the Cambodian riels in one year. To hedge the exchange rate risk arising from this financing support, Brookshire would engage in a swap transaction involving a forward contract. Thus, in accordance with the swap transaction, Brookshire would

Question options:

A. convert the dollars to Cambodian riels in the spot market today and convert Cambodian riels to dollars in one year at today's one-year forward rate.

B. convert the dollars to Cambodian riels in the spot market today and convert dollars to Cambodian riels in one year at the prevailing spot rate one year later.

C. convert the Cambodian riels to dollars in the spot market today and convert Cambodian riels to dollars in one year at today's one-year forward rate.

D. convert the dollars to Cambodian riels in the spot market today and convert Cambodian riels to dollars in one year at the prevailing spot rate one year later.

6. Procter & Gamble, Inc., a U.S.-based MNC, will receive 18 million Dominican pesos on December 1. It is now September 1. Procter & Gamble has negotiated a non-deliverable forward contract with its bank. The reference rate is the Dominican peso's closing exchange rate (in $) quoted by the central bank of the Dominican Republic in 90 days. The Dominican peso's spot rate today is $.021. If the rate quoted bythe central bank of the Dominican Republicon December 1 is $.019, Procter & Gamble will ____ $____.

7. Baylor Bank believes the New Zealand dollar will depreciate over the next five days from $.50 to $.48. The following annual interest rates apply:

Currency Lending Rate Borrowing Rate Dollars 7.10% 7.50% New Zealand dollar (NZ$) 6.80% 7.25%

Baylor Bank has the capacity to borrow either NZ$10 million or $5 million. If Baylor Bank's forecast is correct, what will its dollar profit be from speculation over the five-day period (assuming it does not use any of its existing consumer deposits to capitalize on its expectations)?(30/360 convention used for the interest calculation, i.e., assuming 360 days a year)

8. Johnson & Johnson, Inc., a U.S.-based MNC, will receive 200 million Colombian Pesos on December 1. It is now September 1. Johnson & Johnson has negotiated a non-deliverable forward contract with its bank. The reference rate is the Colombian Peso's closing exchange rate (in $) quoted by Colombia's central bank in 90 days. The Colombian Peso's spot rate today is $.00029. If the rate quoted by Colombia's central bank on December 1 is $.00032, Johnson will ____ $____.