Chapter 21.International Financial Management

1.Suppose that the Croatian kuna is selling for $0.178294 and the Indian rupee is selling for $0.016429.Find (1) the cross exchange rate of the Croatian kuna to the Indian rupee; find how many Croatian kuna are equal to one Indian rupee.

2.If the spot rate of the Turkish lira is $0.521105 and the 90-day forward is $0.511051, is the Turkish lira selling at a premium or a discount?

3.An investor in the United States bought a one-year Brazilian security valued at 226,935 reals.The U.S. dollar equivalent was $100,000.The Brazilian security earned 15% but the real depreciated 5% against the dollar during that period.Find (1) the total ending value of the investment in reals; (2) how much that translates into dollars; (3) the percentage return in dollars on the original $100,000.

4.A CFO of a corporation in Tennessee borrowed 100,000 Canadian dollars from a bank in Reno, Nevada to finance a purchase in Quebec.The loan will be repaid in Canadian dollars at the end of 6 months.The spot rate at the time of the loan was $0.972954.A six-month's future contract with a face value of $100,000 was selling for $0.972000.Find (1) how much the bank could lose on this transaction; (2) the most the bank could lose on this transaction if it hedged.