This document of FIN 415 Week 4 Learning Team Assignment Summary 17 A-1 shows the solutions to the following problems:
A. What new problems and factors are encountered in international, as opposed to domestic, financial management?
B. What does the term arbitrage profit mean?
C. What can a firm do to reduce exchange risk?
D. What are the differences among a forward contract, a futures contract, and options?
E. An American business needs to pay (a) 15,000 Canadian dollars, (b) 1.5 million yen and (c) 55,000 Swiss francs to businesses abroad. What are the dollar payments to the respective countries?
F. An American business pays $20,000, $5,000, and $15,000 to suppliers in, respectively, Japan, Switzerland, and Canada. How much, in local currencies, do the suppliers receive?
H. You own $10,000. The dollar rate in Tokyo is 216.6752. The yen rate in New York is given in the preceding table. Are arbitrage profits possible? Set up an arbitrage scheme with your capital. What is the gain (loss) in dollars?
I.Compute the Canadian dollar/yen spot rate from the data in the preceding table.
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