On April 1, an Australian investor decides to hedge a U.S. portfolio worth $10 million against exchange risk using AUD call options. The spot exchange rate is AUD/$ ? 2.5 or $/AUD ? 0.40. The Australian investor can buy November calls AUD with a strike price of 0.40 U.S. cents per AUD at a premium of 0.8 U.S. cent per AUD. The size of one contract is AUD 125,000. The delta of the option is estimated at 0.5.

a. How many AUD calls should our investor buy to hedge the U.S. portfolio against the AUD/$ currency risk?

b. A few days later the U.S. dollar has dropped to AUD/$ ? 2.463 ($/AUD ? 0.406) and the dollar value of the portfolio has remained unchanged at $10 million. The November 40 AUD call is now worth 1.2 cents per AUD and has a delta estimated at 0.7. What is the result of the hedge?

c. How should the hedge be adjusted?

You are hired as part of a policy review team for the Council of Economic Advisers. Elected leaders whom the Council report to have put their highest priority on increasing U.S. GPD, but also don’t want a worse trade balance. The team leader designates you to develop a theoretically-based policy package that will improve U.S. GDP without worsening the trade balance. The U.S. is a large advanced economy with freely floating exchange rates.

a.) What combination of fiscal and/or monetary policy would you recommend to the Council? Your response should discuss both fiscal and monetary policy, even if your recommendation advises against using one or the other. You will be using and referring to the AS/AD model in constructing your recommendation.

b.) What would be the impact of the policy package that you recommend in (a) on the U.S.’s external trading partners including their GDP, their price level, and their trade balance (i.e., the transmission effect)? IMPACT ON *OTHER* COUNTRIES, NOT THE U.S.!

1. Dr. Chong, a citizen of Singapore, traveled to Singapore from the United States recently and is quarantined in a 4-star hotel at government expense. The hotel charges SGD 300 per night (with breakfast). Aiden expects to be quarantined for 14 days. What is the cost to the government of the two-week hotel stay in U.S. dollars?
2. Given the following prices, calculate the price of pounds in dollars (how many dollars it takes to buy a pound): $1.08374/€, €1.14212/£         
3. Assume the following: Spot rate ¥110/$ and one-year interest rates in Japan and the U.S. are 2% and 4%, respectively. What is the expected exchange rate in a year?
4. You are trying to decide whether to invest in the U.S. or Switzerland for the next 3 months. The spot rate is $.6667/CHF, the 90-day forward is $.6756/CHF, and the annualized rates on the U.S. T-bill and Swiss government 3 month bonds are 10% and 4.5333%. Is it better to invest in the U.S. or Switzerland?

A U.S. based MNC has the following two sets of information, one for its domestic operations and one for its global operations:

Domestic:

Standard deviation of the company’s return = 18% p.a.

Covariance of the company’s return with the U.S. stock market returns = 270

Global:

Standard deviation of the company’s return = 24% p.a.

Covariance of the company’s return with the global stock market returns = 144

In addition, the following market information is available:

U.S. stock market risk premium = 12% p.a.

Standard deviation of the U.S. stock market = 20% p.a.

The risk-free rate in the U.S. = 3% p.a.

Expected return on the global stock market = 20% p.a.

Standard deviation of the global stock market = 30% p.a.

Show whether the cost of equity for domestic operations is higher or lower than that of global operations. Analyze on all levels and for all components and explain the difference in the two costs?

As Tariffs Bite, Get Ready for a 1970s-Style Supply Shock

By Greg Ip | Jun 06, 2019

QUESTIONS:

Please help me with all these questions.

Business Ethics
Case Study
Alwyn a 15-year employee with XYZ Company, was fired for poor job performance and poor attendance, after accruing five disciplinary penalties within a 12-month period under the company's progressive disciplinary policy. A week later, Alwyn told his former supervisor that he had a substance abuse problem.
Although there was no employee assistance program in place and the company had not been aware of Alwyn’s condition, their personnel director assisted Alwyn in obtaining treatment by allowing him to continue receiving insurance benefits and approved his unemployment insurance claim.
Alwyn subsequently requested reinstatement, maintaining that he had been rehabilitated since his discharge and was fully capable of being a productive employee. He pointed to a letter written by his treatment counselor, which said that his prognosis for leading a "clean, sober lifestyle" was a big incentive for him. Alwyn pleaded for another chance, arguing that his past problems resulted from health issue and that XYZ company should have recognized and provided treatment for the problem.
XYZ Company countered that Alwyn should have notified his supervisor of his health problem, and that everything possible had been done to help him receive treatment. Moreover, the company stressed that the employee had been fired for poor performance and absenteeism. Use of the progressive discipline policy had been necessary because the employee had committed a string of offenses over the course of a year, including careless workmanship, distracting others, wasting time, and disregarding safety rules.
Questions:
1. Should Alwyn be reinstated? If yes or no what is the justification?
2. Was the company fair to Alwyn in helping him receive treatment?
3. Did the personnel director behave ethically toward Alwyn?
4. Did Alwyn act ethically for his company? How do you feel?
5. Would it be fair to other employees to reinstate Alwyn? Give your opinion.

Laker Company reported the following January purchases and sales data for its only product. Date Activities Units Acquired at Cost Units sold at Retail Jan. 1 Beginning inventory 185 units @ $ 11.00 = $ 2,035 Jan. 10 Sales 145 units @ $ 20.00 Jan. 20 Purchase 100 units @ $ 10.00 = 1,000 Jan. 25 Sales 125 units @ $ 20.00 Jan. 30 Purchase 270 units @ $ 9.50 = 2,565 Totals 555 units $ 5,600 270 units The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 285 units, where 270 are from the January 30 purchase, 5 are from the January 20 purchase, and 10 are from beginning inventory. Required: 1. Complete comparative income statements for the month of January for Laker Company for the four inventory methods. Assume expenses are $1,700, and that the applicable income tax rate is 40%. (Round your Intermediate calculations to 2 decimal places.)

Votivo had the following securities that were acquired in Year X1:

Assume the investments in stock represent less than 20% control of the company. The reported value on the 12/31/X1 Balance Sheet will total?

Assume the investments in stock represent less than 20% control of the company. What is the amount of the unrealized gain (loss) recorded as Other Comprehensive Income in the 12/31/X1 Statement of Comprehensive Income?

Assume the investments in stock represent less than 20% control of the company. What is the amount of the unrealized gain (loss) recorded on the 12/31/X2 Income Statement?

1. Complete comparative income statements for the month of January for Laker Company for the four inventory methods. Assume expenses are $1,400, and that the applicable income tax rate is 40%. (Round your Intermediate calculations to 2 decimal places.)

[The following information applies to the questions displayed below.]

Laker Company reported the following January purchases and sales data for its only product.

The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 245 units, where 210 are from the January 30 purchase, 5 are from the January 20 purchase, and 30 are from beginning inventory.