Answer the two documents below. One is essay. All questions should be around 500 words and calculations is another documents, need to show working steps.

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Answer the two documents below. One is essay. All questions should be around 500 words and calculations is another documents, need to show working steps.

Answer the two documents below. One is essay. All questions should be around 500 words and calculations is another documents, need to show working steps.
Capital Structure & Cost of Capital How do MNCs make capital structure decisions? 2 Characteristics Corporate Characteristics Host Country Interest Politics Cost of Capital MNCs VS Fully Domestic, which has a high cost of capital? Explain. Managing foreign exchange exposures. Explain 3 types of exchange exposure with using real life example. Translation Economics Transaction Explain what the types and examples in transaction are. Future Forward Money Market Options Export / Import Financing What are the methods of payment? Letter of Credit (LC) Consignment Open Payment (open account) Prepayment Draft How are international trade being paid? (example of payments) Arbitrage Example the three forms of arbitrage. Locational Arbitrage Triangular Arbitrage Covered Interest Arbitrage Explain the factors that determine the exchange Differential in inflation Differential in interest rate Differential in income Government influence Country with higher inflation, the currency will depreciate. Why? What is the theory behind this? Use Theory Purchasing power parity to explain Higher interest rate, currency will also depreciate in the long run. Why? What is the theory behind this? Use Theory International fisher effect to explain. Higher income, currency lower. *tips Explain the components of the balance of payment. Current account Capital account Financial Account 5a. Why do we need balance of payment? To understand the international flow of funds To understand the movement and the influence of the exchange. It can influence Malaysia ringgit (RM). b. Government want to stabilize the currency. Why? c. If (RM) Malaysia ringgit is too strong, why is it good and why is it bad? – Not good because it can affect the country’s export, export will suffer. *tips
Answer the two documents below. One is essay. All questions should be around 500 words and calculations is another documents, need to show working steps.
TUTORIAL – Arbitrage 1. You can borrow RM60,000. You found out the interest rate in Malaysia is 12% p.a. and in US is 14% p.a.. At present, the exchange rate of USD/MYR is 3.5652 and the three month forward is 3.5640. If the exchange rate in three months’ time is 3.5500, how much would your interest arbitrage profit or loss be? (Show all the possible workings). 2. Assume the bid rate of a Singapore dollar is $.40 while the ask rate is $.41 at Bank A. Assume the bid rate of a Singapore dollar is $.42 while the ask rate is $.425 at Bank B. Given this information, what would be your gain if you use $1,000,000 and execute locational arbitrage? That is, how much will you end up with over and above the 1,000,000 you started with? 3. Assume the following information: Spot rate today of Swiss franc = $.60 1-year forward rate as of today for Swiss franc = $.63 Expected spot rate 1 year from now = $.64 Rate on 1-year deposits denominated in Swiss francs = 7% Rate on 1-year deposits denominated in U.S. dollars = 9% From the perspective of U.S. investors with $1,000,000, calculate the yield if he were to perform an interest arbitrage. 4. Natwest Bank quotes the following for the British pound and the New Zealand dollar: Quoted Bid Price Quoted Ask Price Value of a British pound (£) in $ $1.50 $1.52 Value of a New Zealand dollar (NZ$) in $ $.51 $.53 Value of a British pound in New Zealand dollars NZ$3.01 NZ$3.03 Assume you have $10,000 to conduct triangular arbitrage. What is your profit from implementing this strategy? 5. You can borrow USD50,000.00. You found out the interest rate in Malaysia is 11% p.a. and in US is 12% p.a.. At present, the exchange rate of MYR/USD is 0.2455 and the three month forward is 0.2458. If the exchange rate in three months’ time is 0.2457, how much would your interest arbitrage profit or loss be? (Show all the possible workings). 6. Assuming you have USD20,000. Calculate a possible arbitrage profit.   Quoted Bid Price Quoted Ask Price Value of a British pound (£) in $ 1.4900 1.5100 Value of a New Zealand dollar (NZ$) in $ 0.5000 0.5100 Value of a British pound in New Zealand dollars 3.0300 3.0500 7. If you have SGD100,000. Calculate the possible locational arbitrage. MYR/SGD Bid Ask Bank A 0.3020 0.3030 Bank B 0.3032 0.3034 8.     SGD RM Deposit rate   12.00% 10.00% Borrowing rate   13.00% 11.00% Current spot per SGD 3.0000 Forward rate per SGD 2.9500 Amount to be borrowed in SGD 10000.0000 Deposit period(90 days) 90.00 Calculate the covered interest arbitrage.

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