Â Homework Assignment #1General Instructions:ï‚· I require from all graduate students to use Excel in this class. All HW submissions must bedone using Microsoft Excel.ï‚· Reviewing the Excel samples that contain solutions to textbook problems will make it easierto solve the HW problems.Notes when using Excel:ï‚· Include your name in the file. It can be in a title page or in each sheet.ï‚· Donâ€™t use Excel as a word processor. You have to use Excel to actually calculate numericresults. Nevertheless, to show the procedure used, please identify the names of your variables(both input and output).ï‚· Highlight or put a box around your main answers and email the Excel file you prepared.ï‚· Use one sheet for each chapterChapter 21. An MNC converts USD 400,000 into BRL 765,000. Assume zero commissions and fees.a. What is the BRLUSD exchange rate?b. What is the USDBRL exchange rate?2. Consider the quotations in the following table offered by the Chong Hing Bank of Hong Kong forcurrency transactions. Calculate the bid- ask spread (absolute and percent) and identify the least andmost costly spread. In words, explain the significance of your findings.Currency Pair Bid AskUSDHKD 7.3601 7.3626SGDHKD 4.9540 5.9580EURHKD 11.9000 11.9050JPYHKD 0.0635 0.0650FINC 6367 â€“ International finance Homework 1 Page 23. An MNC wishes to sell EUR 1 million that it received from a French customer and obtain itsdomestic currency (USD). The following alternatives are available. Determine which bank providesthe highest amount of USD.Bank Currency Pair Bid Ask CommissionA EURUSD 1.3201 1.3204 USD 250B EURUSD 1.3200 1.3205 USD 100C USDEUR 0.7572 0.7576 USD 2004. Assume that 180-day LIBOR equals 2.7 percent (actual/ 360 convention). Calculate the effectiveannual return. Also calculate the continuously compounded interest rate that will provide anequivalent annual return.5. An MNC makes a Eurodollar deposit for 270 days and earns an effective annual return of 2.76percent. What is the 270- day LIBOR (actual/ 360 convention)?Chapter 31. Duerbo Corporation entered into a forward contract to purchase CHF 5 million in six months at a rateof USD 0.9500. Two months later, CHF is trading at USD 0.9600, and a four- month CHF forwardcontract (maturing at the same time as the original six- month contract) is trading at USD 0.9700. Atthis time, what is the potential loss from default on the forward position?2. Roland Enterprises has exposure to GBP because of its U. K. sales. It is considering the use of GBPfutures to mitigate its risk. The companyâ€™s CFO is not confident that GBP futures are pricedaccurately in markets and assigns the task of futures pricing to his assistant, Mary Snead. Assume thatLIBOR rates based on USD and GBP for six- month maturities are 2.35 percent and 4.98 percent,respectively. LIBOR conventions for these currencies are actual/ 360 and actual/ 365, respectively.Spot GBPUSD equals 1.6150. Calculate the benchmark rate for the six- month GBPUSD futurescontract.3. Rixon Corporation purchases CHF call options with a strike price of USD 0.9200. The optionpremium is USD 0.0215 per currency unit. A financial analyst at Rixon forecasts the followingpossible values for spot CHFUSD at maturity. Calculate option payoff and profit (per currency unit)for each of these spot values.Possible Value of CHFUSD Option Exercise (Y/ N) Payoff Profit0.90000.93000.9600FINC 6367 â€“ International finance Homework 1 Page 34. Shale Corporation purchases BRL put options with a strike price of USD 0.425. The optionpremium is USD 0.0159 per currency unit. A financial analyst at Shale forecasts the followingpossible values for spot BRLUSD at maturity. Calculate option payoff and profit (per currencyunit) for each of these spot values.Possible Value of BRLUSD Option Exercise (Y/ N) Payoff Profit0.4000.4250.4505. Options on GBP trade on the Philadelphia Stock Exchange. A call expiring in three months with astrike price of USD 1.6000 is trading at a price of USD 0.0251. Consider an investor who buysfive contracts and holds the options to maturity. At maturity, GBP is trading at USD 1.6315.Assume contract size is 10,000 currency units. What is the net profit for the person who sold thefive contracts?6. Determine the value of a call option on the JPY that has the following characteristics: (a) is aEuropean type, (b) matures in nine months, and (c) has the strike price of USD 0.0110. In the spotmarket, the JPY is trading at USD 0.0094. The U. S. and Japanese interest rates are 3 percent and1 percent, respectively (continuous compounding). The JPY has an annual standard deviation of13 percent.Â

# Â Homework Assignment #1General Instructions:ï‚· I require from all graduate students to u

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