Question

In: Finance

Suppose Dow Chemical receives quotes of $0.008369-71 for the yen and $0.03665-9 for the Taiwan dollar...

Suppose Dow Chemical receives quotes of $0.008369-71 for the yen and $0.03665-9 for the Taiwan dollar what is the yen cost to dow chemical of buying NT$80 Million.

A. ¥350.2560 Million

A. ¥350.7229 Million

A. ¥79.9128 Million

A. ¥79.9809 Million

Expert Solution

1 Yen = $0.008369 to $0.008371

1 New Taiwan Dollar (NT$) = $ 0.03665 to $0.03669

Now cost calculation for NT$ 80 Million:

Case 1: when 1 NT$ = 0.03665 $ (Minimum value in the range offered)

Value of NT$ 80 = 80 *0.03665 = $ 2.932 Million

Case 2: when 1 NT$ = 0.03669 $ (Maximum value in the range offered)

Value of NT$ 80 = 80*0.03669 = $ 2.9352 Million

Since we always try to minimize cost hence take the minimum value of NT$ 80 Million

Take NT$80 Million = $2.932 Million

Now convert it to Yen.

Case 3: 1 yen = $0.008369 à 1 $ = 1/0.008369

Case 4: 1 Yen = $0.008371 à 1 $ = 1/0.008371

Again since we try to minimize cost hence take the value which give minimum cost

Take 1 $ = 1/0.008371, multiply this with $ 2.932 Million to get value of 80 Million NT$ in terms of yen

We get NT$80 Million = $ 2.932 Million = 2.932 X( 1/0.008371) = 350.2568 Million yen

NT$80 Million = 350.2568 Million yen (aprox)

jeff jeffy answered 2 years ago

Dow Chemical receives quotes from a foreign currency trader of USD 0.1642 – 0.1657 / DKK...

Dow Chemical receives quotes from a foreign currency trader of USD 0.1642 – 0.1657 / DKK and USD 0.2618 – 0.2646 / PLZ. How many DKK will Dow Chemical pay the trader for a purchase of 100 million PLZ? Explain

2. Consider the following quotes: Yen per Pound: 256 Yen per dollar: 180 Dollar per pound:...

2. Consider the following quotes: Yen per Pound: 256 Yen per dollar: 180 Dollar per pound: 1.5 Suppose 1 million dollars invested Is there any possibility of triangular arbitrage? Why or why not? If yes, what is the arbitrage profit? Use $1,000,000. Please show all work will rate 5 stars thank you!

a) Indirect dollar quotes for yen and pound are 100.2468-3579 and 1.3579-654, respectively. What is the...

a) Indirect dollar quotes for yen and pound are 100.2468-3579 and 1.3579-654, respectively. What is the indirect yen for pound cross rate? b) Direct euro quotes for pound and Swiss franc are 1.2468-579 and 0.9876-13. What is the direct franc for pound cross rate? c) Dollar is priced at 100.2468-3579 in Tokyo. Pound is priced at 1.1111-357 in New York. What is the direct yen for pound cross rate? d) Euro is priced at 64.5982-7829 in Moscow. Pound is priced...

4. Suppose the rate of appreciation of the dollar relative to the yen over the next...

4. Suppose the rate of appreciation of the dollar relative to the yen over the next 90 days is normally distributed with mean of -1% and a standard deviation of 3%. Use a spreadsheet program to graph the distribution of the future yen–dollar exchange rate. If the current spot exchange rate is ¥99 /$, and the 90-day forward rate is ¥98.30/$,describe the distribution of yen profits or losses from selling $5,000,000 forward.

Suppose that the Japanese yen depreciates relative to the U.S. dollar. How does this affect the...

Suppose that the Japanese yen depreciates relative to the U.S. dollar. How does this affect the competitiveness of both Ford and Honda in both the U.S. and Japanese markets? Create a numeric example to show how Honda could reduce the dollar price of cars sold in the U.S. and still earn more yen per car compared with the stronger yen and higher dollar price

Question 4: Suppose the current exchange rate for the Japanese Yen against the dollar is $1...

Question 4: Suppose the current exchange rate for the Japanese Yen against the dollar is $1 = 120 yen. Answer the following questions using the long run model of the exchange rate developed in class. a. If you expect Japanese monetary growth to be a total of 25% larger than the US monetary growth rate over the next ten years, what is your best guess as to the exchange rate ten years from now? Be as precise as possible....

a) Suppose that the future dollar-yen exchange rate increases. How does this affect the IS curve?...

a) Suppose that the future dollar-yen exchange rate increases. How does this affect the IS curve? Explain fully. b) If the Bank of Japan decides to decrease their money supply, how would that affect the Japanese LM curve? Explain fully.

Suppose the exchange rate between the U.S. dollar and the Japanese yen is initially ¥90/$. According...

Suppose the exchange rate between the U.S. dollar and the Japanese yen is initially ¥90/$. According to purchasing-power parity, if the price of traded goods rises by 5 percent in the United States and by 15 percent in Japan, what will be the expected exchange rate? ¥99/$ ¥72/$ ¥81/$ ¥90/$ ¥108/$ If Mexico dollarizes its currency, it essentially Ensures that Mexico's business cycle is identical to that of the U.S. Allows the U.S. Federal Reserve Bank to be Mexico's lender...

Suppose that Dow Chemical is looking to hedge some of its euro exposure by borrowing in...

Suppose that Dow Chemical is looking to hedge some of its euro exposure by borrowing in euros. At the same time, Michelin (a French tire manufacturer) is seeking dollars to finance additional investment in the US. Both want the equivalent of $100m. Dow Chemical prefers to borrow floating rate euros, and Michelin fixed rate dollars. Dow Chemical can borrow floating rate at LIBOR + 0.4% vs Michelin ‘s cost of borrowing floating rate euros of LIBOR + 0.2%. Dow’s cost...

#71 Suppose that both the nominal exchange rate (Mexican Peso/U.S. Dollar) is falling and that the...

#71 Suppose that both the nominal exchange rate (Mexican Peso/U.S. Dollar) is falling and that the ratio of the prices (U.S. Dollar/Mexican Peso) is also falling. If the demand for U.S. Dollars relative to the Mexican Peso is rising, which open market theory do we believe is most consistent with our economy? a. Purchasing Power Parity b. Open Economy Model c. Both a and b d. Neither a nor b Answer is B, but why? What exactly is Purchasing Power...