,Help me answer.
The spot exchange rate for Canadian dollars is $C1.33/$US.
Dollarssix-month interest rateone-year interest rate
Canada2%2.5%
U.S.2.5%2.75%
a. What is the six-month fair forward exchange rate?
b. Is the Canadian dollar a discount or premium currency vs. the United States dollar?
c. What does it cost in U.S. dollars to purchase $C1,000 now?
d. How many Canadian dollars will you receive by entering a six-month forward contract to sell $1,000?
e. What will it cost in Canadian dollars to purchase $US1,000 in six months via a forward contract?
If the spot rate for Candian dollars is 1.25 = 1 USD and the annual interest rate on fixed rate one year depostis of Canadian dollars is 2.5% and for US$ is 1.5%, what is the 9 month forward rate for one US dollar in terms of Canadian dollars?
Assuming the same interest rates, what is the 18- month forward rate for one Canadian dollar in USD?
Is this an indirect or a direct rate?
If the forward rate is an accurate predictor of exchange rates, in this case will the pound get stronger or weaker against the dollar? What does this indicate about the market's inflation expectations in the UK compared to the US?
On January 2nd 2017 Toyota expects to ship 25,000 SUVs from its plant in Canada to the US, which it will sell through US dealers on 270 day terms at $38,000 each. So Toyota will receive payment from its dealers on September 28th, 2017. Assuming Toyota needs to cover its expenses in Canada and thus wants to hedge its Canadian dollar exposure using a forward contract with a Canadian bank in the US, what is the minimum amount of Canadian dollars it should receive on September 28th, 2017 given the 9 month forward rate for one USD in terms on Canadian dollars that you calculated above? What are two other ways Toyota might hedge their pound/dollar exposure?
Problems 1. Kenneth's cross-price elasticity of demand for pens and pencils is equal to 2. Are pens and pencils complements or substitutes for Kenneth? Suppose that the price of pens increases by 10%. What is the percentage change in the quantity demanded of pencils? What if this elasticity is equal to 0? What about very large positive number? 2. Kenneth's income elasticity of demand for instant coffee is -1.5. Is instant coffee a normal or an inferior good for Kenneth? If Kenneth's income increases by 15%, what would happen to his quantity demanded? What if this elasticity is equal to 0? Nominal Price Real Price Inflation Index x Scale factor Cost of Market Basket in particular year CPI in particular year = Cost of Market Basket in base year x Scale factor 3. Suppose you want to compare the prices and wages in 2010 to what they were back in 1910. You collect the following data: Year Cost of Market Nominal Price Nominal Price Nominal Basket of Gas of Haircuts Hourly Wage 1910 $50 $0.25 $2.50 $0.50 2010 $400 $4.00 $20.00 $8.00 a. Using 1910 as the base year, which of the following statements is FALSE? 1. The real price of gas in 2010 is $0.50 ii. The percent change in the real price of gas from 1910 to 2010 is 100% iii. The real price of haircuts in 2010 is the same as it was in 1910 iv. The increase in the real price of haircuts from 1910 to 2010 was $2.50 (in 1910 dollars). b. What was the change in the real wage from 1910 to 2010 in terms of 2010 dollars? What was the percentage change in the hourly wage from 1910 to 2010? c. What good (gas, haircuts, labor) experiences the greatest nominal increase in price? What good experiences the greatest real increase in price? 4. Suppose you know that the nominal price of Golden Retrievers in 2008 was $720 per puppy. If you also know that the real price in 2008 was $800 per puppy, what is the inflation rate between 2008 and 2010 using 2010 as the base year?An investor is interested in purchasing shares in XYZ pic. The companvr pavs annual dividends, and a dividend payment of 30 pence per share has been made three months ago. Assuming that future dividends are expected to grow at a rate of 5% per annum compound, what is the maximum price per share that the investor should pay to give a rate of return of 9% per annum? {3.05 J 1) Hiba Inc. just issued zero-coupon bonds with a par value of $1,000. If the bond has a maturity of 15 years and a yield to maturity of 10%, what is the current price of the bond if it is priced conventionally with semi-annual discounting? 2) a) Petty Productions Inc. recently issued 30-year $1,000 face value, 12% annual coupon bonds. The market discount rate for this bond is only 7%. What is the current price of this bond? B) If this a callable bond do you expect investors to pay more or less for the bond? Explain your logic. 3) Five years ago, Tayr Inc. issued twenty-five-year 10% annual coupon bonds with a $1,000 face value each. Since then, interest rates in general have risen and the yield to maturity on the Thompson bonds is now 12%. Given this information, what is the fair market price today for a Tayr's bond? Do investors take into account credit rating of Tayr when they purchase their bonds? 3) Tayr Airways Inc. has a 12% required rate of return. It does not expect to initiate dividends for 15 years, at which time it will pay $2.00 per share in dividends forever. At that time, Tayr Airways expects its dividends to grow at 7% forever. What is an estimate of Tayr Airways' price in 15 years (P15) if its dividend at the end of year 15 is $2.00? 4) When you price a bond what discount rate do you use to find the fair market value of a bond? 5) Carta Industries Inc. issued a zero-coupon bond 5 years ago that had a maturity of 55 years. The bond's par value is $1,000, and the current yield on similar bonds is 7.5%. What is the expected price of this bond, using the semiannual convention if it is traded in the secondary market?6. LewCo announces very early on the morning of January 3, 2020 (after the split and the 2019 dividend payment), that the recent housing crash and subsequent regulatory changes have reduced demand for their construction projects, resulting in a change to their earnings outlook and dividend policy. They announce that they plan to hold their dividend constant at $5 per year for the foreseeable future. a. What do you predict will be the new share price assuming the cost of capital as in questions 1 and 2? b. You believe the housing market will recover, and LewCo will resume growing its dividend. What is the value of the company assuming dividends growth is zero for three years and then grows again at 6% per year? Hint: you might want to separate the value of the company into two pieces: the value for year 4 and beyond plus the value of the first 3 years. 7. I've taken a brief look at Pepsi (PEP) and Coke (KO) using Yahoo Finance. Current Year Ending Pepsi Growth 5 Years Price 9/5/2019 $3.77 8.7% CAGR 9.0% $136.66 9/6/2018 $3.47 11.2% Avergage 9.0% 8/30/2017 $3.12 7.0% Sid Dev 2.0% 8/31/2016 $2.91 7.2% 9/2/2015 $2.72 11.0% 9/3/2014 $2.45 10.7% A. What is the r* or cost of capital implied by the market, assuming that dividends grow at the 5-year compound annualized rate of growth (CAGR)? Current Year Ending Coke Growth 5 Years Price 9/13/2019 $1.59 3.2% CAGR 5.9% $53.85 9/13/2018 $1.54 5.5% Avergage 5.9% 9/14/2017 $1.46 5.8% Std Dev 1.9% 9/13/2016 $1.38 6.6% 9/1 1/2015 $1.30 8.4% 9/1 1/2014 $1.20 9.1% B. Use the r* from Pepsi to value Coke. They are both global beverage companies. What is the value of Coke stock (P* ) based on the model? C. What action would you take as an investor based on your analysis
