CHAPTER20INTERNATIONALCORPORATEFINANCEAnswerstoConceptsReviewandCriticalThinkingQuestions感謝閱讀1.a.Thedollarissellingatapremiumbecauseitismoreexpensiveintheforwardmarketthaninthespotmarket(SFr1.53versusSFr1.50).謝謝閱讀謝謝閱讀b.Thefrancisexpectedtodepreciaterelativetothedollarbecauseitwilltakemorefrancstobuyonedollarinthefuturethanitdoestoday.感謝閱讀感謝閱讀c.InflationinSwitzerlandishigherthanintheUnitedStates,asarenominalinterestrates.精品文檔放心下載2.Theexchangeratewillincrease,asitwilltakeprogressivelymorepesostopurchaseadollar.ThisistherelativePPPrelationship.感謝閱讀謝謝閱讀3.a.TheAustraliandollarisexpectedtoweakenrelativethedollar,becauseitwilltakemoreA$inthefuturetobuyonedollarthanitdoestoday.感謝閱讀感謝閱讀b.TheinflationrateinAustraliaishigher.感謝閱讀c.NominalinterestratesinAustraliaarehigher;relativerealratesinthetwocountriesarethesame.謝謝閱讀4.AYankeebondismostaccuratelydescribedby.精品文檔放心下載5.No.Forexample,ifacurrencystrengthens,importsbeecheaper(good),

butitsexportsbeemoreexpensiveforotherstobuy(bad).Thereverseistrue

forcurrencydepreciation.感謝閱讀精品文檔放心下載精品文檔放心下載6.Additionaladvantagesincludebeingclosertothefinalconsumerand,thereby,

savingontransportation,significantlylowerwages,andlessexposureto

exchangeraterisk.Disadvantagesincludepoliticalriskandcostsofsupervising

distantoperations.精品文檔放心下載謝謝閱讀感謝閱讀7.Onekeythingrememberisthatdividendpaymentsaremadeinthehomecurrency.

Moregenerally,itmaybethattheownersofthemultinationalareprimarily

domesticandareultimatelyconcernedabouttheirwealthdenominatedintheir

homecurrencybecause,unlikeamultinational,theyarenotinternationally

diversified.精品文檔放心下載感謝閱讀感謝閱讀感謝閱讀8.a.False.IfpricesarerisingfasterinGreatBritain,itwilltakemore謝謝閱讀poundstobuythesameamountofgoodsthatonedollarcanbuy;thepoundwilldepreciaterelativetothedollar.感謝閱讀精品文檔放心下載b.False.Theforwardmarketwouldalreadyreflecttheprojecteddeteriorationof

theeurorelativetothedollar.Onlyifyoufeelthattheremightbe

additional,unanticipatedweakeningoftheeurothatisn’treflectedin

forwardratestoday,willtheforwardhedgeprotectyouagainstadditional

declines.精品文檔放心下載精品文檔放心下載謝謝閱讀精品文檔放心下載c.True.Themarketwouldonlybecorrectonaverage,whileyouwouldbecorrectall

thetime.精品文檔放心下載9.a.Americanexporters:theirsituationingeneralimprovesbecauseasaleof

theexportedgoodsforafixednumberofeuroswillbeworthmoredollars.

Americanimporters:theirsituationingeneralworsensbecausethepurchase

oftheimportedgoodsforafixednumberofeuroswillcostmoreindollars.感謝閱讀精品文檔放心下載感謝閱讀精品文檔放心下載b.Americanexporters:theywouldgenerallybebetteroffiftheBritish

government’sintentionsresultinastrengthenedpound.

Americanimporters:theywouldgenerallybeworseoffifthepound

strengthens.精品文檔放心下載精品文檔放心下載謝謝閱讀c.Americanexporters:theywouldgenerallybemuchworseoff,becauseanextreme

caseoffiscalexpansionlikethisonewillmakeAmericangoods

prohibitivelyexpensivetobuy,orelseBraziliansales,iffixedin

cruzeiros,wouldbeeworthanunacceptablylownumberofdollars.謝謝閱讀謝謝閱讀感謝閱讀感謝閱讀Americanimporters:theywouldgenerallybemuchbetteroff,because

Braziliangoodswillbeemuchcheaperpurchaseindollars.謝謝閱讀謝謝閱讀10.IRPisthemostlikelytoholdbecauseitpresentstheeasiestandleastcostly

meanstoexploitanyarbitrageopportunities.RelativePPPisleastlikelyto

holdsinceitdependsontheabsenceofmarketimperfectionsandfrictionsin

ordertoholdstrictly.謝謝閱讀感謝閱讀謝謝閱讀11.Italldependsonwhethertheforwardmarketexpectsthesameappreciationover

theperiodandwhethertheexpectationisaccurate.Assumingthatthe

expectationiscorrectandthatothertradersdonothavethesameinformation,

therewillbevaluehedgingthecurrencyexposure.謝謝閱讀謝謝閱讀精品文檔放心下載感謝閱讀12.Onepossiblereasoninvestmentintheforeignsubsidiarymightbepreferredisif

thisinvestmentprovidesdirectdiversificationthatshareholderscouldnot

attainbyinvestingontheirown.Anotherreasoncouldbeifthepolitical

climateintheforeigncountrywasmorestablethaninthehomecountry.

Increasedpoliticalriskcanalsobeareasonyoumightpreferthehome

subsidiaryinvestment.Indonesiacanserveasagreatexampleofpoliticalrisk.感謝閱讀謝謝閱讀精品文檔放心下載謝謝閱讀謝謝閱讀謝謝閱讀Ifitcannotbediversifiedaway,investinginthistypeofforeigncountrywill

increasethesystematicrisk.Asaresult,itwillraisethecostofthecapital,

andcouldactuallydecreasetheNPVoftheinvestment.感謝閱讀感謝閱讀感謝閱讀13.Yes,thefirmshouldundertaketheforeigninvestment.If,aftertakinginto

considerationallrisks,aprojectinaforeigncountryhasapositiveNPV,the

firmshouldundertakeit.Notethatinpractice,thestatedassumption(thatthe

adjustmenttothediscountratehastakenintoconsiderationallpoliticaland

diversificationissues)isahugetask.Butoncethathasbeenaddressed,the

netpresentvalueprincipleholdsforforeignoperations,justasfordomestic.感謝閱讀謝謝閱讀謝謝閱讀謝謝閱讀謝謝閱讀謝謝閱讀14.Iftheforeigncurrencydepreciates,theU.S.parentwillexperienceanexchange

ratelosswhentheforeigncashflowisremittedtotheU.S.Thisproblemcould

beoverebysellingforwardcontracts.Anotherwayofoveringthisproblemwould

beborrowinthecountrywheretheprojectislocated.精品文檔放心下載感謝閱讀感謝閱讀謝謝閱讀15.False.Ifthefinancialmarketsareperfectlypetitive,thedifferencebetween

theEurodollarrateandtheU.S.ratewillbeduetodifferencesinriskand

governmentregulation.Therefore,speculatinginthosemarketswillnotbe

beneficial.謝謝閱讀謝謝閱讀謝謝閱讀16.ThedifferencebetweenaEurobondandaforeignbondisthattheforeignbondis

denominatedinthecurrencyofthecountryoforiginoftheissuingpany.

Eurobondsaremorepopularthanforeignbondsbecauseofregistrationdifferences.

Eurobondsareunregisteredsecurities.謝謝閱讀精品文檔放心下載感謝閱讀謝謝閱讀SolutionstoQuestionsandProblems感謝閱讀NOTE:end-of-chapterproblemsusingaspreadsheet.Manyproblems

requiremultiplesteps.spaceandreadabilityconstraints,these

areincludedinthissolutionsmanual,occurred.However,thefinalanswerforeachproblemfoundduring

anyproblem.謝謝閱讀Basic1.Usingthequotesfromthetable,weget:精品文檔放心下載a.$50(€0.7870/$1)=€39.35b.$1.2706c.€5M($1.2706/€)=$6,353,240精品文檔放心下載d.NewZealanddollare.Mexicanpeso(P11.0023/$1)($1.2186/€1)=P13.9801/€感謝閱讀Thisisacrossrate.g.ThemostvaluableistheKuwaitdinar.TheleastvaluableistheIndonesianrupiah.精品文檔放心下載2.a.Youwouldprefer￡100,since:謝謝閱讀(￡100)($.5359/￡1)=$53.59謝謝閱讀b.Youwouldstillprefer￡100.Usingthe$/￡exchangerateandtheSF/￡exchangeratetofindtheamountofSwissfrancs￡100willbuy,weget:感謝閱讀精品文檔放心下載(￡100)($1.8660/￡1)(SF.8233)=SF226.6489感謝閱讀c.UsingthequotesinthebooktofindtheSF/￡crossrate,wefind:感謝閱讀(SF1.2146/$1)($0.5359/￡1)=SF2.2665/￡1精品文檔放心下載The￡/SFexchangerateistheinverseoftheSF/￡exchangerate,so:謝謝閱讀￡1/SF.4412=￡0.4412/SF1謝謝閱讀3.a.F=￥104.93(per$).Theyenissellingatapremiumbecauseitismore精品文檔放心下載expensiveintheforwardmarketthaninthespotmarket($0.0093659versus

$0.009530).感謝閱讀b.F=$1.8587/￡.Thepoundissellingatadiscountbecauseitislessexpensiveintheforwardmarketthaninthespotmarket($0.5380versus$0.5359).c.Thevaluethedollarwillfallrelativetotheyen,sinceittakesmore

dollarstobuyoneyeninthefuturethanitdoestoday.Thevalueofthe

dollarwillriserelativetothepound,becauseitwilltakefewerdollars

tobuyonepoundinthefuturethanitdoestoday.感謝閱讀感謝閱讀精品文檔放心下載精品文檔放心下載4.a.TheU.S.dollar,sinceoneCanadiandollarwillbuy:精品文檔放心下載(Can$1)/(Can$1.26/$1)=$0.7937謝謝閱讀b.ThecostinU.S.dollarsis:謝謝閱讀(Can$2.19)/(Can$1.26/$1)=$1.74精品文檔放心下載AmongthereasonsthatabsolutePPPdoesn’tholdaretariffsandotherbarrierstotrade,transactionscosts,taxes,anddifferenttastes.謝謝閱讀精品文檔放心下載c.TheU.S.dollarissellingatadiscount,becauseitislessexpensiveinthe

forwardmarketthaninthespotmarket(Can$1.22versusCan$1.26).精品文檔放心下載謝謝閱讀d.TheCanadiandollarisexpectedtoappreciateinvaluerelativetothedollar,

becauseittakesfewerCanadiandollarstobuyoneU.S.dollarinthefuture

thanitdoestoday.謝謝閱讀精品文檔放心下載e.InterestratesintheUnitedStatesareprobablyhigherthantheyareinCanada.謝謝閱讀5.a.Thecrossratein￥￡termsis:謝謝閱讀(￥115/$1)($1.70/￡1)=￥195.5/￡1感謝閱讀b.Theyenisquotedtoolowrelativetothepound.Takeoutaloanfor$1andbuy謝謝閱讀￥115.Usethe￥115purchasepoundsatthecross-rate,whichwillgiveyou:謝謝閱讀￥115(￡￥185)=￡0.6216感謝閱讀Usethepoundstobuybackdollarsandrepaytheloan.Thecostrepaytheloanwillbe:精品文檔放心下載￡0.6216($1.70/￡1)=$1.0568精品文檔放心下載Youarbitrageprofitis$0.0568perdollarused.感謝閱讀6.Wecanrearrangetheinterestrateparityconditionanswerthisquestion.Theequationwewilluseis:感謝閱讀R=(FT–S)/S00+RUsingthisrelationship,wefind:精品文檔放心下載GreatBritain:R=(￡0.5394–￡0.5359)/￡0.5359+.038=4.45%Japan:R=(￥104.93–￥106.77)/￥106.77+.038=2.08%Switzerland:R=(SFr1.1980–SFr1.2146)/SFr1.2146+.038=2.43%7.IfweinvestintheU.S.forthenextthreemonths,wewillhave:精品文檔放心下載$30M(1.0045)=$30,406,825.233謝謝閱讀IfweinvestinGreatBritain,wemustexchangethedollarstodayforpounds,and

exchangethepoundsfordollarsinthreemonths.Aftermakingthesetransactions,

thedollaramountwewouldhaveinthreemonthswouldbe:感謝閱讀謝謝閱讀感謝閱讀($30M)(￡0.56/$1)(1.0060)/(￡0.59/$1)=$28,990,200.05謝謝閱讀WeshouldinvestinU.S.8.Usingtherelativepurchasingpowerparityequation:精品文檔放心下載Ft=S0×[1+(h–h)]tWefind:Z3.92=Z3.84[1+(h–h)]3感謝閱讀h–h=(Z3.92/Z3.84)–1h–h=.0069InflationinPolandisexpectedtoexceedthatintheU.S.by0.69%overthisperiod.謝謝閱讀9.Theprofitwillbethequantitysold,timesthesalespriceminusthecostof

production.TheproductioncostisinSingaporedollars,sowemustconvertthis

toU.S.dollars.Doingso,wefindthatiftheexchangeratesstaythesame,the

profitwillbe:精品文檔放心下載精品文檔放心下載感謝閱讀Profit=30,000[$145–{(S$168.50)/(S$1.6548/$1)}]感謝閱讀Profit=$1,295,250.18Iftheexchangeraterises,wemustadjustthecostbytheincreasedexchangerate,so:謝謝閱讀Profit=30,000[$145–{(S$168.50)/1.1(S$1.6548/$1)}]感謝閱讀Profit=$1,572,954.71Iftheexchangeratefalls,wemustadjustthecostbythedecreasedexchangerate,so:精品文檔放心下載Profit=30,000[$145–{(S$168.50)/0.9(S$1.6548/$1)}]精品文檔放心下載Profit=$955,833.53Tocalculatethebreakevenchangeintheexchangerate,weneedtofindthe

exchangeratethatmakethecostinSingaporedollarsequaltothesellingprice

inU.S.dollars,so:感謝閱讀謝謝閱讀$145=S$168.50/STS=S$1.1621/$1TS=–.2978or–29.78%declineT感謝閱讀10.IfIRPholds,then:FF=(Kr6.43)[1+(.08–.05)]=Kr6.5257SincegivenFisKr6.56,anarbitrageopportunityexists;theforward精品文檔放心下載premiumistoohigh.BorrowKr1todayat8%interest.Agreetoa180-day

forwardcontractatKr6.56.Converttheloanproceedsintodollars:精品文檔放心下載精品文檔放心下載Kr1($1/Kr6.43)=$0.15552感謝閱讀Investthesedollarsat5%,endingupwith$0.15931.Convertthedollarsbackintokroneas謝謝閱讀$0.15931(Kr6.56/$1)=Kr1.04506精品文檔放心下載RepaytheKr1loan,endingwithaprofitof:精品文檔放心下載Kr1.04506–Kr1.03868=Kr0.00638謝謝閱讀b.Tofindtheforwardratethateliminatesarbitrage,weusetheinterestrateparitycondition,so:謝謝閱讀FF=(Kr6.43)[1+(.08–.05)]=Kr6.525711.TheinternationalFishereffectstatesthattherealinterestrateacross

countriesisequal.WecanrearrangetheinternationalFishereffectasfollows

toanswerthisquestion:謝謝閱讀精品文檔放心下載R–h=R–hh=R+h–Ra.h=.05+.035–.039h=.046or4.6%b.h=.07+.035–.039h=.066or6.6%c.h=.10+.035–.039h=.096or9.6%12.a.Theyenisexpectedgetstronger,sinceitwilltakefeweryentobuyonedollarinthefuturethanitdoestoday.感謝閱讀感謝閱讀b.hh–h–h(￥129.76–￥131.30)/￥131.30=–.0117or–1.17%(1–.0117)–1=–.0461or–4.61%精品文檔放心下載4TheapproximateinflationdifferentialbetweentheU.S.andJapanis–謝謝閱讀4.61%annually.13.Weneedtofindthechangeintheexchangerateovertime,soweneedtousetherelativepurchasingpowerparityrelationship:感謝閱讀精品文檔放心下載Ft=S0×[1+(h–h)]TUsingthisrelationship,wefindtheexchangerateinoneyearshouldbe:精品文檔放心下載FF11=215[1+(.086–.035)]=HUF225.971Theexchangerateintwoyearsshouldbe:精品文檔放心下載FF2=215[1+(.086–.035)]2=HUF237.492Andtheexchangerateinfiveyearsshouldbe:精品文檔放心下載FF55=215[1+(.086–.035)]=HUF275.71514.Usingtheinterest-rateparitytheorem:感謝閱讀(1+R)/(1+R)=(0,1)/S0Wecanfindtheforwardrateas:精品文檔放心下載(0,1)=[(1+R)/(1+R)]S精品文檔放心下載0(0,1)=(1.13/￡(0,1)=$1.57/￡精品文檔放心下載15.First,weneedforecastthefuturespotrateforeachofthenextthreeyears.

Frominterestrateandpurchasingpowerparity,theexpectedexchangerateis:謝謝閱讀精品文檔放心下載E(S)=[(1+R)/(1+R)]TS精品文檔放心下載T0So:E(S)=(1.0480/1$1.22/€=$1.2282/€感謝閱讀1E(S)=(1.0480/1.0410)$1.22/€=$1.2365/€精品文檔放心下載2

2E(S)=(1.0480/3$1.22/€=$1.2448/€感謝閱讀3Nowwecanusethesefuturespotratesfindthedollarcashflows.Thedollarcashfloweachyearwillbe:感謝閱讀謝謝閱讀Year0cashflow=–€$12,000,000($1.22/€)=–$14,640,000.00

Year1cashflow=€$2,700,000($1.2282/€)=$3,316,149.86

Year2cashflow=€$3,500,000($1.2365/€)=$4,327,618.63

Year3cashflow=(€3,300,000+7,400,000)($1.2448/€)=$13,319,111.90謝謝閱讀精品文檔放心下載精品文檔放心下載感謝閱讀AndtheNPVoftheprojectwillbe:感謝閱讀NPV=–$14,640,000+$3,316,149.86/1.13+$4,4327,618.63/1.132+謝謝閱讀$13,319,111.90/1.133

NPV=$914,618.7316.Implicitly,itisassumedthatinterestrateswon’tchangeoverthelifeof謝謝閱讀theproject,buttheexchangerateisprojectedtodeclinebecausetheEuroswissrateislowerthantheEurodollarrate.謝謝閱讀謝謝閱讀b.Wecanuserelativepurchasingpowerparitytocalculatethedollarcashflowsateachtime.Theequationis:謝謝閱讀精品文檔放心下載E[S]=(SFr1.72)[1+(.07–.08)]T謝謝閱讀TE[S]=1.72(.99)TTSo,thecashflowseachyearinU.S.dollartermswillbe:精品文檔放心下載tSFrE[S]US$0–27.0M1.7200–$15,697,674.42謝謝閱讀1+7.5M1.7028$4,404,510.22

2+7.5M1.6858$4,449,000.22

3+7.5M1.6689$4,493,939.62

4+7.5M1.6522$4,539,332.95

5+7.5M1.6357$4,585,184.79謝謝閱讀感謝閱讀謝謝閱讀精品文檔放心下載感謝閱讀AndtheNPVis:NPV=–$15,697,674.42+$4,404,510.22/1.13+$4,449,000.22/1.13+感謝閱讀2$4,493,939.62/1.133+$4,539,332.95/1.134+$4,585,184.79/1.135

NPV=$71,580.10感謝閱讀c.Rearrangingtherelativepu