finance- Suppose that the exchange rate is 0.60 dollars per Swiss franc.

finance- Suppose that the exchange rate is 0.60 dollars per Swiss franc.

Question
Chapter 17

(17-5) Suppose that the exchange rate is 0.60 dollars per Swiss franc. If the franc appreciates 10% against the dollar, how many francs would a dollar buy tomorrow?

(17-6) Suppose the exchange rate between U.S. dollars and the Swiss franc is SFr1.6=$1 and the exchange rate between the dollar and the British pound is €1=$1.50. What then is the cross rate between francs and pounds?

(17-7) Assume that interest rate parity holds. In both the spot market and the 90-day forward market. 1 Japanese yen equals 0.0086 dollar. In Japan, 90-day risk-free securities yield 4.6%. What is the yield on 90-day risk-free securities in the United States?

(17-8) In the spot market, 7.8 pesos can be exchanged for 1 U.S. dollar. A pair of headphones costs $15 in the United States. If purchasing power parity holds, what should be the price of the same headphones in Mexico?

(17-11)Boisjoly Watch Imports has agreed to purchase 15,000 Swiss watches for 1 million francs at today’s spot rate. The firm’s financial manager, James Desreumaux, has noted the following current spot and forward rates:

U.S. Dollar/Swiss Franc Swiss Franc/U.S. Dollar

Spot 1.6590 0.6028

30-day forward 1.6540 0.6046

90-day forward 1.6460 0.6075

180-day forward 1.6400 0.6098

On the same day, Desreumaux agrees to purchase 15,000 more watches in 3 months at the same price of 1 million Swiss Francs.

a. What is the cost of watches in U.S. dollars, if purchased at today’s spot rate?

b. What is the cost in dollars of the second 15,000 batch if payment is made in 90 days and the spot rate at that time equals today’s 90-day forward rate?

c. If the exchange rate for is 0.50 Swiss Francs per dollar in 90 days, how much will Desreumaux have to pay (in dollars) for the watches?

Chapter 28

(28-1)Define each of the following terms:

a. Baumol model

b. Total carrying cost; total ordering cost; total inventory costs

c. Economic Ordering Quantity (EOQ); EOQ model; EOQ range

d. Reorder point; safety stock

e. Red-line method; two-bin method; computerized inventory control system

f. Just-in-time system; outsourcing

(28-2)Indicate by a (+), (−), or (0) whether each of the following events would probably causeaverage annual inventory holdings to rise, fall, or be affected in an indeterminate manner:

a. Our suppliers change from delivering by train to air freight. __________________

b. We change from producing just-in-time to meet seasonal

demand to steady, year-round production. __________________

c. Competition in the markets in which we sell increases. __________________

d. The general rate of inflation rises. __________________

e. Interest rates rise; other things are constant. __________________