英文版罗斯公司理财习题答案Chap020brzf.docx

CHAPTERR 20INTERNAATIONAAL CORRPORATTE FINNANCEAnswerss to CConceppts Reeview and CCriticcal Thhinkinng Queestionns1. a.The ddollarr is ssellinng at a preemium becauuse itt is mmore eexpenssive iin thee forwward mmarkett thann in tthe sppot maarket (SFr 1.53 versuus SFrr 1.500).b.Thee frannc is expeccted tto deppreciaate reelativve to the ddollarr becaause iit willl takke morre fraancs tto buyy one dollaar in the ffuturee thann it ddoes ttoday.c.Infflatioon in Switzzerlannd is higheer thaan in the UUnitedd Stattes, aas aree nomiinal iintereest raates.2.The exchaange rrate wwill iincreaase, aas it will take progrressivvely mmore ppesos to puurchasse a ddollarr. Thiis is the rrelatiive PPPP rellationnship.3.a.TThe Auustrallian ddollarr is eexpectted too weakken reelativve to the ddollarr, beccause it wiill taake moore A$ in tthe fuuture to buuy onee dolllar thhan itt doess todaay.b.Thee infllationn ratee in AAustraalia iis higgher.c.Nomminal interrest rrates in Auustrallia arre higgher; relattive rreal rrates in thhe twoo counntriess are the ssame.4.A Yaankee bond is moost acccurattely ddescriibed bby d.5.No. For eexamplle, iff a coountryys cuurrenccy strrengthhens, imporrts beecome cheapper (ggood), but its eexportts beccome mmore eexpenssive ffor otthers to buuy (baad). TThe reeversee is ttrue ffor cuurrenccy deppreciaation.6.Addiitionaal advvantagges inncludee beinng clooser tto thee finaal connsumerr and, therreby, savinng on transsportaation, signnificaantly lowerr wagees, annd lesss expposuree to eexchannge raate riisk. DDisadvvantagges inncludee poliiticall riskk and costss of ssupervvisingg disttant ooperattions.7.One key tthing to reemembeer is that dividdend ppaymennts arre madde in the hhome ccurrenncy. MMore ggeneraally, it maay be that the oownerss of tthe muultinaationaal aree primmarilyy domeestic and aare ulltimattely cconcerrned aabout theirr weallth deenominnated in thheir hhome ccurrenncy beecausee, unllike aa multtinatiional, theyy are not iinternnationnally diverrsifieed.8.a.FFalse. If ppricess are risinng fasster iin Greeat Brritainn, it will take more poundds to buy tthe saame ammount of gooods tthat oone doollar can bbuy; tthe poound wwill ddeprecciate relattive tto thee dolllar.b.Fallse. TThe foorwardd markket woould aalreaddy refflect the pprojeccted ddeteriioratiion off the euro rrelatiive too the dollaar. Onnly iff you feel that theree mighht be addittionall, unaanticiipatedd weakkeningg of tthe euuro thhat issnt rrefleccted iin forrward ratess todaay, willl the forwaard heedge pprotecct youu agaiinst aadditiional decliines.c.Truue. Thhe marrket wwould only be coorrectt on aaveragge, whhile yyou woould bbe corrrect all tthe tiime.9.a.AAmericcan exxporteers: ttheir situaation in geenerall imprroves becauuse a sale of thhe expportedd goodds forr a fiixed nnumberr of eeuros will be woorth mmore ddollarrs.Ameriican iimportters: theirr situuationn in ggeneraal worrsens becauuse thhe purrchasee of tthe immporteed gooods foor a ffixed numbeer of euross willl costt moree in ddollarrs.b.Ameericann expoorterss: theey wouuld geenerallly bee bettter offf if the BBritissh govvernmeents intenntionss resuult inn a sttrengtthenedd pounnd.Ameriican iimportters: they wouldd geneerallyy be wworse off iif thee pounnd strrengthhens.c.Ameericann expoorterss: theey wouuld geenerallly bee muchh worsse offf, beccause an exxtremee casee of ffiscall expaansionn likee thiss one will make Ameriican ggoods prohiibitivvely eexpenssive tto buyy, or else Braziilian saless, if fixedd in ccruzeiiros, wouldd becoome woorth aan unaaccepttably low nnumberr of ddollarrs.Ameriican iimportters: they wouldd geneerallyy be mmuch bbetterr off, becaause BBrazillian ggoods will becomme mucch cheeaper to puurchasse in dollaars.10.IRPP is tthe moost liikely to hoold beecausee it ppresennts thhe eassiest and lleast costlly meaans too explloit aany arrbitraage oppportuunitiees. Reelativve PPPP is lleast likelly to hold sincee it ddependds on the aabsencce of markeet impperfecctionss and fricttions in orrder tto holld strrictlyy.11.It all ddependds on whethher thhe forrward markeet exppects the ssame aapprecciatioon oveer thee periiod annd wheether the eexpecttationn is aaccuraate. Assumming tthat tthe exxpectaation is coorrectt and that otherr tradders ddo nott havee the same inforrmatioon, thhere wwill bbe vallue too hedgging tthe cuurrenccy expposuree.12.Onee posssible reasoon invvestmeent inn the foreiign suubsidiiary mmight be prreferrred iss if tthis iinvesttment proviides ddirectt diveersifiicatioon thaat shaarehollders couldd not attaiin by invessting on thheir oown. AAnotheer reaason ccould be iff the polittical climaate inn the foreiign coountryy was more stablle thaan in the hhome ccountrry. Inncreassed pooliticcal riisk caan alsso be a reaason yyou miight ppreferr the home subsiidiaryy inveestmennt. Inndonessia caan serrve ass a grreat eexamplle of polittical risk. If iit cannnot bbe divversiffied aaway, invessting in thhis tyype off foreeign ccountrry willl inccreasee the systeematicc riskk. As a ressult, it wiill raaise tthe coost off the capittal, aand coould aactuallly deecreasse thee NPV of thhe invvestmeent.13.Yess, thee firmm shouuld unndertaake thhe forreign invesstmentt. Iff, aftter taaking into consiiderattion aall riisks, a prooject in a foreiign coountryy has a possitivee NPV, the firm shoulld unddertakke it. Notte thaat in practtice, the sstatedd assuumptioon (thhat thhe adjjustmeent too the discoount rrate hhas taaken iinto cconsidderatiion alll polliticaal andd diveersifiicatioon isssues) is a huge task. Butt oncee thatt has been addreessed, the net ppresennt vallue prrincipple hoolds ffor fooreignn operrationns, juust ass for domesstic.14.If the fforeiggn currrencyy deprreciattes, tthe U.S. paarent will experriencee an eexchannge raate looss whhen thhe forreign cash flow is reemitteed to the UU.S. This probllem coould bbe oveercomee by ssellinng forrward contrracts. Anoother way oof oveercomiing thhis prroblemm woulld be to boorrow in thhe couuntry wheree the projeect iss locaated.15.Fallse. IIf thee finaanciall markkets aare peerfecttly coompetiitive, the diffeerencee betwween tthe Euurodolllar rrate aand thhe U.SS. ratte willl be due tto diffferennces iin rissk andd goveernmennt reggulatiion. Thereefore, specculatiing inn thosse marrkets will not bbe benneficiial.16.Thee diffferencce bettween a Eurrobondd and a forreign bond is thhat thhe forreign bond is deenominnated in thhe currrencyy of tthe coountryy of ooriginn of tthe isssuingg comppany. Eurobbonds are mmore ppopulaar thaan forreign bondss becaause oof reggistraation diffeerencees. Euurobonnds arre unrregisttered securritiess.Solutioons too Quesstionss and ProbllemsNOTE: AAll ennd-of-chaptter prroblemms werre sollved uusing a sprreadshheet. Many probllems rrequirre mulltiplee stepps. Duue to spacee and readaabilitty connstraiints, when thesee inteermediiate ssteps are iincludded inn thiss soluutionss manuual, rroundiing maay apppear tto havve occcurredd. Howwever, the finall answwer foor eacch prooblem is foound wwithouut rouundingg duriing anny steep in the pprobleem.Basic1.Usinng thee quottes frrom thhe tabble, wwe gett:a.$500(0.78700/$1) = 399.35b.$1.2706c.5MM($1.22706/) = $6,353,240d.Neww Zealland ddollarre.Mexxican pesof.(P111.00223/$1)($1.22186/1) = P13.98001/ This is a crosss ratee.g.Thee mostt valuuable is thhe Kuwwait dinar. The lleast valuaable iis thee Indoonesiaan ruppiah. 2.a.YYou woould ppreferr £1000, sinnce: (£1000)($.5359/£1) = $53.59b.Youu woulld stiill prrefer £100. Usinng thee $/£ exchaange rrate aand thhe SF/£ excchangee ratee to ffind tthe ammount of Swwiss ffrancss £1000 willl buy, we gget:(£1000)($1.8660/£1)(SSF .8233) = SF 226.6489c.Usiing thhe quootes iin thee bookk to ffind tthe SFF/£ crross rrate, we fiind:(SF 11.21466/$1)($0.53359/£11) = SSF 2.26665/£11 The ££/SF eexchannge raate iss the inverrse off the SF/£ exchaange rrate, so:£1/SFF .4412 = £0.44412/SF 13.a.FF180 = ¥104.933 (perr $). The yyen iss sellling aat a ppremiuum beccause it iss moree expeensivee in tthe foorwardd markket thhan inn the spot markeet ($00.0093659 vversuss $0.0009530).b.F900 = $1.8587/£. Thee pounnd is selliing att a diiscounnt beccause it iss lesss expeensivee in tthe foorwardd markket thhan inn the spot markeet ($00.53800 verssus $00.53599).c.Thee valuue of the ddollarr willl falll relaative to thhe yenn, sinnce itt takees morre dolllars to buuy onee yen in thhe futture tthan iit doees todday. TThe vaalue oof thee dolllar wiill riise reelativve to the ppound, becaause iit willl takke fewwer doollarss to bbuy onne pouund inn the futurre thaan it does todayy.4.a.TThe U.S. doollar, sincce onee Canaadian dollaar willl buyy: (Can$1)/(CCan$1.26/$1) = $00.79377b.Thee costt in UU.S. ddollarrs is:(Can$2.19)/(Cann$1.266/$1) = $1.74 Amongg the reasoons thhat abbsolutte PPPP doessnt hhold aare taariffss and otherr barrriers to trrade, transsactioons coosts, taxess, andd diffferentt tasttes.c.Thee U.S. dolllar iss sellling aat a ddiscouunt, bbecausse it is leess exxpensiive inn the forwaard maarket than in thhe spoot marrket (Can$11.22 verssus Caan$1.226).d.Thee Canaadian dollaar is expeccted tto apppreciaate inn valuue rellativee to tthe doollar, becaause iit takkes feewer CCanadiian doollarss to bbuy onne U.SS. dolllar iin thee futuure thhan itt doess todaay.e.Intterestt ratees in the UUnitedd Stattes arre proobablyy highher thhan thhey arre in Canadda.5.a.TThe crross rrate iin ¥/££ termms is:(¥1155/$1)($1.70/£1) = ¥1195.5/£11b.Thee yen is quuoted too llow reelativve to the ppound. Takee out a loaan forr $1 aand buuy ¥1115. Usee the ¥115 to ppurchaase poounds at thhe crooss-raate, wwhich will give you:¥115(£1/¥185) = £00.62166 Use tthe poounds to buuy bacck dolllars and rrepay the lloan. The ccost tto reppay thhe loaan willl be:£0.62216($1.70/£1) = $1.00568 You aarbitrrage pprofitt is $0.05668 perr dolllar ussed.6.We ccan reearrannge thhe intterestt ratee pariity coonditiion too answwer thhis quuestioon. Thhe equuationn we wwill uuse iss:RFC = (FT S0)/S0 + RUSSUsing this relattionshhip, wwe finnd:Great Britaain: RFC = (£0.53994 £0.5359)/£0.55359 + .038 = 4.445%Japan: RFC = (¥104.933 ¥1006.77)/¥106.77 + .0388 = 2.008%Switzeerlandd:RFC = (SFr 11.19800 SFFr 1.22146)/SSFr 1.2146 + .038 = 2.443%7.If wwe invvest iin thee U.S. for the nnext tthree monthhs, wee willl havee: $30M(1.00445)3 = $330,4066,825.23If we invesst in Greatt Brittain, we muust exxchangge thee dolllars ttoday for ppoundss, andd exchhange the ppoundss for dollaars inn threee monnths. Afterr makiing thhese ttransaactionns, thhe dolllar aamountt we wwould have in thhree mmonthss woulld be: ($30M)(£0.556/$1)(1.00660)3/(£0.59/$1) = $228,9900,200.05 We shoould iinvestt in UU.S.8.Usinng thee relaative purchhasingg poweer parrity eequatiion:Ft = SS0 × 11 + (hhFC hhUS)t We finnd:Z3.92 = Z3.841 + (hFC hhUS)3 hFC hUS = (Z3.92/Z3.84)1/3 1 hFC hUS = .00669Inflattion iin Polland iis exppectedd to eexceedd thatt in tthe U.S. byy 0.699% oveer thiis perriod.9.The profiit willl be the qquantiity soold, ttimes the ssales pricee minuus thee costt of pproducction. The produuctionn costt is iin Sinngaporre dolllars, so wwe musst connvert this to U.S. dolllars. Doingg so, we fiind thhat iff the exchaange rrates stay the ssame, the pprofitt willl be:Profitt = 300,000$145 (S$1168.500)/(S$1.65448/$1) Profitt = $11,295,250.118If thee exchhange rate risess, we must adjusst thee costt by tthe inncreassed exxchangge ratte, soo:Profitt = 300,000$145 (S$1168.500)/1.11(S$1.6548/$1) Profitt = $11,572,954.771If thee exchhange rate fallss, we must adjusst thee costt by tthe deecreassed exxchangge ratte, soo:Profitt = 300,000$145 (S$1168.500)/0.99(S$1.6548/$1) Profitt = $9955,8333.53To callculatte thee breaakevenn channge inn the exchaange rrate, we neeed too findd the exchaange rrate tthat mmake tthe coost inn Singgaporee dolllars eequal to thhe sellling pricee in UU.S. ddollarrs, soo:$145 = S$1668.50/ST ST = SS$1.16621/$11 ST = .29788 or 29.788% deccline10.a.If IRRP hollds, tthen:F180 = (Krr 6.43)1 + (.08 .05)1/2 F180 = Kr 6.52557Sincee giveen F1880 is Kr6.556, ann arbiitragee oppoortuniity exxists; the forwaard prremiumm is ttoo hiigh. Borroow Kr1 tooday aat 8% interrest. Agreee to aa 180-day fforwarrd conntractt at KKr 6.56. Conveert thhe loaan prooceedss intoo dolllars:Kr 1 ($1/Kr 6.43) = $00.155552 Invesst theese doollarss at 55%, ennding up wiith $00.159331. Coonvertt the dollaars baack innto krrone aas$0.155931(Kr 6.56/$1) = Kr 1.004506 Repayy the Kr 1 lloan, endinng witth a pprofitt of:Kr1.004506 Kr1.033868 = Kr 0.000638b.To find the fforwarrd ratte thaat eliiminattes arrbitraage, wwe usee the interrest rrate pparityy condditionn, so:F180 = (Krr 6.43)1 + (.08 .05)1/2 F180 = Kr 6.5255711.Thee inteernatiional Fisheer efffect sstatess thatt the real interrest rrate aacrosss counntriess is eequal. We ccan reearrannge thhe intternattionall Fishher efffect as foollowss to aanswerr thiss quesstion: RUS hUS = RRFC hhFC hFC = RFC + hhUS RRUSa.hAUUS = .05 + .035 .0039 hAUS = .0466 or 44.6%b.hCAAN = .07 + .035 .0039 hCAN = .0666 or 66.6%c.hTAAI = .10 + .035 .0039 hTAI = .0966 or 99.6%12.a.The yyen iss expeected to geet strrongerr, sinnce itt willl takee feweer yenn to bbuy onne dolllar iin thee futuure thhan itt doess todaay.b.hUSS hJAAP » (¥1229.76 ¥1311.30)/¥131.30 hUS hJAPP = .0117 or 11.17%(1 .01177)4 1 = .00461 orr 4.661%The aapproxximatee infllationn diffferenttial bbetweeen thee U.S. and Japann is 4.611% annnuallyy.13.We need to fiind thhe chaange iin thee exchhange rate over time, so wwe neeed to use tthe reelativve purrchasiing poower pparity rrelatiionshiip:Ft