37-40

37. If Chinese Yuan becomes weaker relative to US dollar, it would A) discourage US exports, and benefit US consumers B) discourage US exports, and hurt US consumers C) encourage US exports, and benefit US consumers D) encourage US exports, and hurt US consumers A U.S. firm has borrowed 50 million from a British firm. The borrower will need to convert dollars to pounds to repay the loan when it is due. The U.S. firm could hedge the exchange rate 38. risk by A) Buying pounds forward B) Selling pounds forward C) Borrowing pounds D) Buying dollars forward E) Borrowing dollars A Swiss bank converted 1 million Swiss francs to euros to make a euro loan to a customer when the exchange rate was 1.75 Swiss francs per euro. The borrower agreed to repay the principle plus 4% interest in 1 year. The borrower repaid euros at loan maturity and when the loan was repaid the exchange rate was 1.65 Swiss francs per euro. What was the bank's Swiss franc rate of return? A) 10.30% B) 7.75% C) 4.58% D) -1.94% E)0% 39. 40. In the previous question, if the Swiss bank had hedged its foreign exchange rate risk by selling one-year euro loan proceeds in forward foreign exchange market at 1.85 francs per euro. What was the Swiss bank's franc rate of return? A) 4.75% B) 7.62% C) 9.94% D) 2.43% E) -1.62%