a refer to the questions given

Dreher Brewery, a company operating in Hungary is a landlocked country in Central Europe, has today effected sales to an Indian FMCG company, the payment being due 6 months from the date of invoice. The invoice amount is 227 lakhs Hungarian Forint (HUF). At today's spot rate, it is equivalent to ` 53.92 lakhs. It is anticipated that the exchange rate will decline by 11% over the 6 months period and in order to protect the HUF payments, the importer proposes to take appropriate action in the foreign exchange market. The 6 months forward rate is presently quoted as 3.91 HUF per rupee. You are required to calculate the expected loss and to show how it can be hedged by a forward contract.

Ford India Private Limited is a wholly owned subsidiary of the Ford Motor Company in India. The vehicles and engines use as an integral parts import from Ford Motor Company of Canada Ltd. And the Ford Motor Company of Canada Ltd. invoiced the sales to the Indian company, the payment being due three months from the date of invoice. The invoice amount is $ 11,250 and at todays spot rate of $0.015 per `.1, is equivalent to ` 7,50,000. It is anticipated that the exchange rate will decline by 10% over the three months period and in order to protect the dollar proceeds, the importer proposes to take appropriate action through foreign exchange market. The three months forward rate is quoted as $0.0145 per ` 1. You are required to calculate the expected loss and to show, how it can be hedged by forward contract.

Energy Drilling Company an Australian Company has a won a contract in Russia for drilling oil field. The project will require an initial investment of 4700 RUB Million. The oil field along with equipment's will be sold to Russian Government for 7700 RUB Million in one year time. Since the Russian Government will pay for the amount in RUB the company is worried about exposure due exchange rate volatility. You are required to: i. Construct a swap that will help the Energy Drilling Company to reduce the exchange rate risk. ii. Assuming that Russian Government offers a swap at spot rate which is 1AUD = 44.89 RUB in one year, then should the company should opt for this option or should it just do nothing. The spot rate after one year is expected to be 1AUD = 48.89 RUB. Further you may also assume that the Energy Drilling Company can also take a AUD loan at 5% p.a. Solution : i. The following swap arrangement can be entered by Energy Drilling Company. a. Swap a AUD loan today at an agreed rate with any party to obtain Russian Ruble to make initial investment. b. After one year swap back the Russian Ruble with AUD at the agreed rate. In such case the company is exposed only on the profit earned from the project. Strategic Financial Management 9 SANJAY SARAF SIR FX SWAP PROBLEM - 7 Energy Drilling Company an Australian Company has a won a contract in Russia for drilling oil field. The project will require an initial investment of 4700 RUB Million. The oil field along with equipment's will be sold to Russian Government for 7700 RUB Million in one year time. Since the Russian Government will pay for the amount in RUB the company is worried about exposure due exchange rate volatility. You are required to: i. Construct a swap that will help the Energy Drilling Company to reduce the exchange rate risk. ii. Assuming that Russian Government offers a swap at spot rate which is 1AUD = 44.89 RUB in one year, then should the company should opt for this option or should it just do nothing. The spot rate after one year is expected to be 1AUD = 48.89 RUB. Further you may also assume that the Energy Drilling Company can also take a AUD loan at 5% p.a.

Suppose Canada is a closed economy and in its long-run equilibrium initially. The government increases its subsidy to new capital investment projects. At the same time, the shortage of computer chips/semiconductors forces many manufactures to delay their spending on replacing depreciated machinery and equipment.

In the context of the long-run classical model, examine the effects of the above events on the following variables in the long run:

output real interest rate national savings real rental price of capital price level Explain and support your answer by ONE diagram for the market of loanable funds and ONEdiagram for the rental market for capital.