CHAPTER 8 Management of Transaction ExposureWord下载.docx

1、b） the extent to which the value of the firm would be affected by unanticipated changes in exchange ratec） the potential that the firms consolidated financial statement can be affected by changes in exchange ratesd） ex post and ex ante currency exposuresAnswer: a）2 The most direct and popular way of

2、 hedging transaction exposure is by:a） exchange-traded futures optionsb） currency forward contractsc） foreign currency warrantsd） borrowing and lending in the domestic and foreign money markets b）3 If you have a long position in a foreign currency, you can hedge with:a） A short position in an exchan

3、ge-traded futures optionb） A short position in a currency forward contractc） A short position in foreign currency warrantsd） borrowing （not lending） in the domestic and foreign money markets4 If you a foreign currency denominated debt, you can hedge with:a） A long position in a currency forward cont

4、ractb） A long position in an exchange-traded futures optionc） Buying the foreign currency today and investing it in the foreign county.d） Both a） and c） d）5 The sensitivity of “realized” domestic currency values of the firms contractual cash flows denominated in foreign currency to unexpected change

5、s in the exchange rate is:a） Transaction exposureb） Translation exposurec） Economic exposured） None of the above6 The sensitivity of the firms consolidated financial statements to unexpected changes in the exchange rate is:7 The extent to which the value of the firm would be affected by unexpected c

6、hanges in the exchange rate is: c）8 With any hedgea） Your losses on one side should about equal your gains on the other side.b） You should try to make money on both sides of the transaction: that way you make money coming and going.c） You should spend at least as much time working the hedge as worki

7、ng the underlying deal itself.d） You should agree to anything your banker puts in front of your face.9 Suppose that Boeing Corporation exported a Boeing 747 to British Airways and billed 10 million payable in one year. The money market interest rates and foreign exchange rates are given as follows:T

8、he U.S. one-year interest rate: 6.10% per annumThe U.K. one-year interest rate:9.00% per annumThe spot exchange rate:$1.50/The one-year forward exchange rate$1.46/Assume that Boeing sells a currency forward contract of 10 million for delivery in one year, in exchange for a predetermined amount of U.

9、S. dollar. Which of the following is （or are） true? On the maturity date of the contract Boeing will:（i）have to deliver 10 million to the bank （the counterparty of the contract）（ii）take delivery of $14.6 million（iii）have a zero net pound exposure（iv）have a profit, or a loss, depending on the future

10、changes in the exchange rate, from this British salea） （i） and （iv）b） （ii） and （iv）c） （ii）, （iii）, and （iv）d） （i）, （ii）, and （iii） d） 10 Suppose that Boeing Corporation exported a Boeing 747 to British Airways and billed 10 million for delivery in one year, in exchange for a predetermined amount of

11、U.S. dollar. Suppose that on the maturity date of the forward contract, the spot rate turns out to be $1.40/ （i.e. less than the forward rate of $1.46/）. Which of the following is true?a） Boeing would have received $14.0 million, rather than $14.6 million, had it not entered into the forward contrac

12、tb） Boeing gained $0.6 million from forward hedgingc） a） and b）d） none of the above11 Use the following table for exchange rate data.Your firm is a U.K.-based exporter of British bicycles. You have sold an order to an Italian firm for 1.000.000 worth of bicycles. Payment from the Italian firm （in ）

13、is due in twelve months. Your firm wants to hedge the receivable into pounds. Not dollars.CountryU.S. $ equiv.Currency per U.S. $TuesdayMondayBritain （Pound） 62,5001.60001.61000.6250.62111 Month Forward1.63000.61733 Months Forward1.66000.60246 Months Forward1.72000.581412 Months Forward1.80000.5556E

14、uro 62,5001.20000.8333331.21000.826451.23000.8130081.26000.7936511.29001.32000.7751940.7575758Detail a strategy using forward contracts that will hedge your exchange rate risk. Have an estimate of how many contracts of what type.a） Borrow 970,873.79 in one year you owe 1m, which will be financed wit

15、h the receivable. Convert 970,873.79 to dollars at spot, receive $1.165.048,54. Convert dollars to pounds at spot, receive 728.155.34.b） Sell 1m forward using 16 contracts at $1.20 per 1. Buy 750,000 forward using 12 contracts at $1.60 per 1c） Sell 1m forward using 16 contracts at the forward rate o

16、f $1.29 per 1.d） Sell 1m forward using 16 contracts at the forward rate of $1.29 per 1. Buy 750,000 forward using 12 contracts at the forward rate of $1.72 per Rationale: Sell 1m forward using 16 contracts, , at the forward rate of $1.29 per 1. This results in $1,290,000 which is worth 750.000 at th

17、e forward rate of $1.72 per pound. Buy 750.000 forward using 12 contracts, , at the forward rate of $1.72 per 1.12 A Japanese EXPORTER has a 1,000,000 receivable due in one year. Spot and forward exchange rate data is given in the table:Spot exchange rates1-year Forward RatesContract size$1.20 = 1.0

18、0$1.25 = 1.0062,500$1.00 = 10012012,500,000The one-year risk free rates are i$ = 4.03%; i = 6.05%; and i = 1%. Detail a strategy using forward contracts that will hedge exchange rate risk.a） Borrow 970,873.79 today; in one year you owe 1m, which will be financed with the receivable. Convert 970,873.

19、79 to dollars at spot, receive $1,165,048.54. Convert dollars to yen at spot, receive 116,504,854.b） Sell 1m forward using 16 contracts at the forward rate of $1.20 per 1. Buy 150,000,000 forward using 11.52 contracts, at the forward rate of $1.00 = 120.c） Sell 1m forward using 16 contracts at the f

20、orward rate of $1.25 per 1. Buy 150,000,000 forward using 12 contracts, at the forward rate of $1.00 = c） at the forward rate of $1.25 per 1. This results in $1,250,000 which is worth 150,000,000 at the forward rate of $1.00 = 120:. Buy 150m forward using contracts, at the forward rate of $1.00 = 13

21、 Your firm has a British customer that is willing to place a $1 million order, but wants to pay in pounds instead of dollars. The spot exchange rate is $1.85 = 1.00 and the one-year forward rate is $1.90 = 1.00. The lead time on the order is such that payment is due in one year. What is the fairest

22、exchange rate to use?a） $1.85 = 1.00b） $1.8750 = c） $1.90 = Payment is due in one year. If they have to pay in dollars, they can hedge with a forward contract at the rate of $1.90 = 14 Your firm is a U.K.-based exporter of British bicycles. You have sold an order to an American firm for $1,000,000 w

23、orth of bicycles. Payment from the American firm （in U.S. dollars） is due in six months. Detail a strategy using forward contracts that will hedge your exchange rate risk.1.81000.55251.83000.54641.86000.53761.82000.5495a） Go short 12 six-month forward contracts; pay 555,600.b） Go short 16 six-month

24、forward contracts. Pay approximately 537,600c） Go long 12 six-month forward contracts. Receive approximately 549,500.d） Go long 16 six-month forward contracts; raise approximately Buy 537,634.41 （a long position in the contract） forward using 12 contracts, , at the forward rate of $1.86 per 1; 537,634.41 = $1,000,000 1/$1.86 15 Your firm is a U.S.-based exporter of bicycles. You have sold an order to a French firm for 1,000,000 worth of bicycles. Payment from t