Consider all questions below
1. Assume you are a trader with Citi Bank. The Singapore dollar?U.S. dollar (SGD/$) spot exchange rate is SGD1.60/$, the Canadian dollar?U.S. dollar (CD/$) spot rate is CD1.33/$, and the (SGD/CD) spot rate is SGD1.15/CD. Show how you can make a triangular arbitrage profit by trading at these prices. Ignore the bid-ask spreads for this problem. Assume that you have $1,000,000 with which to conduct the arbitrage.
2. A global equity manager, Jane, is assigned to select stocks from a universe of large stocks throughout the world. The manager will be evaluated by comparing her returns to the return on the MSCI World Market Portfolio, but she is free to hold stocks from various countries in whatever proportions she finds desirable. The results for a given month are shown in the following table.
Manager's Return in Country Manager's Weight Weight in MSCI Index Return of Stock Index for that Country
US 2% 70% 60% 2.5%
Japan 1% 20% 30% 1.2%
UK 0.5% 10% 10% 0.5%
a) What was the contribution by her country allocation decisions to relative performance? What was the contribution of her stock selection ability within countries?
b) What was the manager's return in the month? What was her over-performance or underperformance?
3. Assume that you can borrow as much as $100,000,000 to invest for six months. Currently, the spot exchange rate is ?1.01 per dollar and the six-month forward exchange rate is ?0.99 per dollar. The interest rate is 8.0% per annum in the U.S. and 7% per annum in the Euro Zone. How would you carry out covered interest arbitrage? Show all the steps and determine the arbitrage profit.
4. Suppose that your firm is operating in a segmented capital market. What actions would you recommend to mitigate the negative effects?
5.Suppose you are a euro-based investor who just sold Amazon shares that you had bought a year ago. You had invested 10,000 euros to buy Amazon shares for $120 per share; the exchange rate was $1.15 per euro. You sold the stock for $135 per share and converted the dollar proceeds into euro at the exchange rate of $1.06 per euro.
a) How much is the profit from this investment in euro terms? Compute the rate of return on your investment in euro terms.
b) How much of the return is due to the exchange rate movement?
D Question 14 1 p Consider a natural monopoly with a large fixed cost and a small and constant marginal cost per unit produced that does not receive any subsidies. Which of the following statements is true? 1. The government should intervene to make sure that there are at least two firms operating in the market which will reduce the prices and costs of the product. II. Government regulation involving marginal cost pricing eliminates the deadweight loss and the monopoly remains profitable. Ill. Government regulation involving average cost pricing always maximizes total surplus. None of the other answers is correct only II is true O only I is true O only Ill is true only II and Ill are true D Question 15 1 ptsPricing Strategy Competition is serious business and sometimes fierce. The stakes are high. Unless the rm has a monopoly, pricing is one area that may be intensely competitive, and not all competition is fair or legal. When considering pricing strategy, the international business manager must be aware of the strategies of otherflrrns when setting the firm's own strategy. Pricing is an important part of the marketing mix. Firms must look at charging different prices in different markets, pricing as a competitive weapon, and the regulatory factors including government control and antidumping regulations. As managers set prices under the strategy, they must be aware of many different dynamics. All will affect the design and implementation of pricing strategy. Roll over the items on the left for a description and then drag each item to the appropriate column. Is it a consideration of price discrimination, strategic pricing, or regulatory inuence? _l__l If the coupon had been delivered, the neighbor would have won a giant sweepstakes. The neighbor has actual cause against the boss, Fred, Penelope, the gardener, and the mailman. On this basis. the neighbor has a good case. 19 Clem is from a hard living family and he eats nails for breakfast. After one especially large breakfast of nails, he became sick and so missed work. Clem wants to sue the nail company. Assumption of the risk might be a defense available to the company. 20 A person who is injured while a passanger in a taxi cab might have a strict liability cause of action. 21. One of Zeke's rentors was late in paying rent. Wondering if the renter had moved out. Zeke went to the house looked in through one of the windows. Zeke saw furniture and other items, but no renter. Assuming the rentor had moved out, Zeke went inside to see if there was anything of marketable value which could be used as a rent payment. He found several items which he began taking out of the house. Just then, the renter came to the house. Zeke has committed the torts of burglary, larceny, trespass, and embezzlement. 22. Martha and Ben were Las Vegas stars who had a wild animal act. One of the animals was Martha's beloved Leonardo the Lion. Leo was a loving mammal who had never shown any tendency towards hostility of any kind. One day while doing the show, Ben's knee buckled and he fell suddenly to the stage floor. This happened in front of Leo, who became immediately concerned and with a big paw tried to grab Ben to help him. Ben was severely injured by Leo's attempt to help. Martha is liable in strict liability. 23. A tort is a civil wrong litigated, if necessary, in civil court. 24. An act which gives rise to a tort action can also be a crime. 25. "Duty" in tort is a responsibility to act or not act that one person owes to another., 26. A physician owes a duty to help everyone he/she can. 27. Fred was a physician who was in a hurry and so did not stop to help a stranger in a medical emergency. Fred breached his legal duty to help. 28. In another instance, Fred stopped to help, but he was negligent in the medical treatment provided. Fred breached his duty to help. 29 The stranger was permanently injured after Fred's help. It is a fact that Fred breached his duty to the stranger which caused damages. Fred is liable in law to the stranger. 30. For every crime there is a civil wrong. For every civil wrong, there is not necessarily a crime. 31. In tort. it is true that duty, breach, causation (both actual and proximate), and damages must happen in order for there to be a tort. 32. Fred's boss was in bad humor because Jake hit his car, and ended up unreasonably yelling at Fred at work. Fred, now upset, was mad when he went home, slamming his front door when he entered. The door knob broke off. beaning Rofo. Fred's dog. This gave Rofo a bad attitude who then growled at the mailman as he delivered the mail. The mailman, now flustered, fails to deliver mail to Fred's next door neighbor, Mergatroid. In that mail was the winning envelope for a 1 million dollar drawing prize. Melba found out after the due date for responding. Melba can sue all of the people named under the theory of proximate cause. 33. The court looks at the amount of damages in determining the importance of a given case.Question 19 1?. An element to establish a negligent tort is that the defendant breached a duty of care owed to the injured person. If} True '1?) False Question 20 20. Inducing someone to breach {or break} a contract with another partyr is legally:r permissible if done in the name of competition. C) True CI False Consider the graph below. The market price is P. Suppose the government by rule or regulations sets a regulated price of P, or P. P Market S1 P 2 Starting Equilibrium P 1 P3 D1 Q1
