You purchase a call option on pounds for a premium of $0.03 per unit, with an exercise price of $1.64; the option will not be exercised until the expiration date, if at all. If the spot rate on the expiration date is $1.66, your net profit per unit is:

An MNC is considering establishing a two-year project in New Zealand with a $6,250,000 initial investment. The required rate of return on this project is 16.4 percent. The project is expected to generate cash flows of NZ$4,700,000 in Year 1 and NZ$7,800,000 in Year 2, excluding the salvage value. Assume no taxes and a stable exchange rate of $0.59 per NZ$ over the next two years. All cash flows are remitted to the parent. What is the break-even salvage value (measured in U.S. dollars)?

Assume that a bank’s bid rate on Swiss francs is $0.58 and its ask rate is $0.61. Its bid/ask percentage spread is:

Assume that the bank’s bid quote for the Mexican peso is $0.135 and the ask price is $0.140. If you have $93,000, how many Mexican pesos could you purchase?

Which of the following are true statements?(I) Since translation exposure does not have an impact on cash flows, its control is relatively unimportant in comparison to transaction exposure, which involves potential real cash flow losses.(II) Since it is generally not possible to eliminate both translation exposure and transaction exposure, it is more logical to effectively manage transaction exposure.

Christine, Inc. is considering a capital budgeting project in Morocco that requires an initial outlay of 3,990,000 Moroccan dirham. The dirham is currently valued at $0.55 and is expected to remain unchanged for the next two years. In the first and second years of operation, the project will generate 2,200,000 dirham in each year. After two years, Christine will terminate the project and the expected salvage value is 6,100,000 dirham. Christine has assigned a discount rate of 21.4%.There is currently no withholding tax on remittances to the U.S., but there is a 59% chance that the Moroccan government will impose a withholding tax of 23% beginning next year.There is a 45.5% chance that the Moroccan government will pay Christine 5,390,000 dirham after two years instead of the 6,100,000 dirham that it expects.What is the probability that the Moroccan government will impose a 23% withholding tax and pay a salvage of 6,100,000 dirham?

Refer to the rates below. Travis Corp. will receive 430,000 Jordanian dinar (JOD) in 360 days. The current spot rate of the dinar is $1.58, while the 360-day forward rate is $1.49. How much will Travis receive in 360 days from implementing a money market hedge (assume any receipts before the date of the receivable are invested)? U.S.Jordan360-day borrowing rate5.4%4.2%360-day deposit rate5.1%3.5%

Assume that the bank’s bid quote for the Mexican peso is $0.125 and the ask price is $0.129. If you have $103,000, how many Mexican pesos could you purchase?

The inflation rate in the United States is 10.9 percent while the inflation rate in Japan is 7.1 percent. The current exchange rate for the Japanese yen (¥) is $0.0077. After supply and demand for the Japanese yen have adjusted in the manner suggested by purchasing power parity, the new exchange rate for the yen will be:

Liz, Inc. is considering a capital budgeting project in Spain. The company believes there is a 14% chance of a low withholding tax and a high salvage value, which would generate an NPV 213,000 of euros. There is a 17% change of a high withholding tax and a high salvage value, which would result in a 161,000 euro NPV. There is a 42% chance of a low withholding tax and a low salvage value, which would produce an NPV of 114,000 euros. Finally, there is a 27% chance of a high withholding tax and a low salvage value, which would produce an NPV of –80,000 euros. What is the expected NPV of this project?