CorporateFinance公司理财机械工业出版社RossCh031第31章答案

1、 Corporate Finance 公司理财Stephen A.Ross机械工业出版社Chapter 31: International Corporate Finance31.1 a.In direct terms, $1.6317 / PoundIn European terms, DM1.8110 / $b. The Japanese yen is selling at a premium to the U.S. dollar in the forward markets.Today, at the spot rate, U.S.$ 1 buys 143, while ￥at the

2、90-day future rate, U.S.$ 1 buys only 142￥.01. Clearly, Yen are getting more expensive in dollar terms.This is even easier to see in direct terms:At the spot rate, the yen cost just under 6 cents, while the 90-day yen costs over 7 cents.c. It will be important to Japanese companies that will receive

3、 or make payments in dollars. It will also be important to other international companies outside Japan that must make or receive payments in yen. For these companies, future cash flows depend on the exchange rate.d. The 3 month forward exchange rate is $0.6743 / SF. The amount of Swiss francs receiv

4、ed will be$100,000SF148,301.94. =.$0.6743 / SFWe should sell dollars, because at the spot rate, it would be SF 149,454,49.e.Let Sxbe the spot rate of currency X for YySPound/DMSPound/$ S$/DM=Pound 0.6129$0.55221 $DM 1Pound 0.3384DM 1SYen/SFSYen/$ S$/SF? 0.6129$0.6691=1 $SF 1? 95.6813 SF 1458 / 6f. B

5、oth banks reduce their exposure to foreign exchange risk. If a bank finds anotherbank with a complimentary mismatch of cash flows in terms of foreign currencies, itshould arrange a swap since both banks cash flows would be more closely matched.31.2a.It is easiest to see this by considering from the

6、point of view of the DM:DM2 and DML4$and write as the inverse:$0.5 and LDM0.25DMThen write as a ratio:$0.5DM2.0LL0.25DMFor no arbitrage, the quote for$must be 2.0, but instead it is 1.8. Therefore, anLarbitrage opportunity does exist.b.Similarly, 100 / 2 = 50, and the quote is50/DM, so arbitrage￥ do

7、es not existc.and 100/7.812.8 , but the quote is14/HKD,￥ meaning arbitrage does exist31.3a.False. On the contrary, according to Relative Purchasing Power Parity, anexpectation of higher inflation in Japan should cause the yen to depreciate against thedollar.b.False. Assuming that the forward market

8、is efficient, any expectation of higherinflation in France should be reflected in discounted French francs in the forwardmarket. Therefore, no protection from risk would be available by using forwardcontracts.c.True. The fact that other participants in the market do not have informationregarding the

9、 differences in the relative inflation rates in the two countries will makeour knowledge of this fact a special factor that will make speculation in the forward market successful.31.4The approximation formula given in the text is:459 / 6S*BDWDwhereS*BDWDThen,rate of change in the BD/WD exchange rate

10、inflation rate in Empire Blackinflation rate in Empire WhiteS*10%5%5%0.05So, the spot rate at year end is31.4(continued)*S1 = S0 1+SBD 2.625WD31.5a.The Interest-rate parity theorem specifies:1iF (0,1)1i*S(0)where:i domestic interest ratei * = foreign interest rateF(0,1) = current price of a 1 month

11、forward contractS(0) = current domestic-currency price of spot foreign exchangeIn this case, we have (and solving for the forward rate):1 iUSS(0)$F(0,3) =1+i FranceFFSince S(0) is $/FF, we must take the inverse of the quote given in the problem, soS(0)= 160.16667Since i USand iFrance are specified i

12、n the problem annually and we want the 3-monthforward rate, we must find the 3-month interest rates, so:i US5%31.25%12i France8%32%12So, now we have:460 / 6F(0,3) =1.0125 0.166671.02=0.16544Convert this back to FF/$ (1/0.16544)and we get FF 6.04/$b. Enter the buy-side position of a 3 month FF forwar

13、d contract worth1,000,000 x 6.04 = FF6.04 million. Then, when they buy the cosmetics 3 months from now, they will have the necessary French Francs, regardless of what happens to the FX markets during those 3 months.31.6a.Compare the end-of-period investment value of each country:Investment in the U.

14、K.:The treasurer can obtain 2.5 million Pounds = $5 million / ($2 / Pound). After investing in the U.K. for three months at 9% he will have 2,556,250 pounds = 2.5 million pounds x (1 + 0.09 / 4)The forward sale of pounds will provide $5,150,843.75 (= 2,556,250 Pounds x $2.015 / Pound).Investment in

15、the U.S.:After investing in the U.S. for three months at 12%, the treasurer will have $5,150,000 = $5,000,000 x (1 + 0.12 / 4).Since investing in the UK yields $843.75 more than investing in the US, the treasuere should invest in the UK.b.From the equation for interest-rate parity theorem:1iF (0,1)1

16、i*S(0)where:i domestic interest ratei * = foreign interest rateF(0,1) = current price of a 1 period forward contractS(0) = current domestic-currency price of spot foreign exchangeInstead of interpreting the period as 1 month as before and in the text, we can interpret it as 1 year. Then we have1iUSS

17、(0)F(0,1) =iUK11.13 $1.50/Pound1.08$1.57/Pound461 / 6c. It all depends on whether the forward market expects the same appreciation over the period and whether the expectation is accurate. Assuming that the expectation is correct and that other traders do not have the same information, there will be

18、value to hedging the currency exposure.31.7a.One possible reason investment in the foreign subsidiary might be preferred is if thisinvestment provides direct diversification that shareholders could not attain byinvesting on their own. Another reason could be if the political climate in the foreignco

19、untry was more stable than in the home country.Increased political risk can also be a reason you might prefer the home subsidiaryinvestment.Indonesia can serve as a great example of political risk. If it cannot be diversifiedaway, investing in this type of foreign country will increase the systemati

20、c risk. As aresult, it will raise the cost of the capital, and could actually decrease the NPV of theinvestment.b.First, we need to forecast the future spot rates for the next 3 years. From interest rateand purchasing power parity, the expected exchange rate isES(1) $/DM 1i US$/DM(0)1 i WG1.1131.06$

21、0.5/DM$0.525/DMSimilarly,1.1132ES(2) $/DM $0.5/DM1.06$0.5513/DM1.1133ES(3) $/DM $0.5/DM1.06$0.5788/DMNow, use these future spot rates to estimate the future cash flows in dollars, and discount those dollar cash flows:462 / 6NPV ( DM10,000,0 00DM4,000,00 0 $0.525/DM$0.5/DM)1.15DM3,000,00 0$0.5513/DM

22、(DM3,000,0 00DM2,100,00 0)$0.5788/DM1.1521.153$5,000,000$1,826,087$1,250,586$1,940,909$17,582c. Yes, the firm should undertake the foreign investment. If, after taking into consideration all risks, a project in a foreign country has a positive NPV, the firm should undertake it. Note that in practice

23、, the stated assumption (that the adjustment to the discount rate has taken into consideration all political and diversification issues) is a huge task. But once that has been addressed, the net present value principle holds for foreign operations, just as for domestic.31.7(continued)d. If the foreign currency depreciates, the U.S. parent will experience an exchange rate loss when the foreign cash flow is remitted to the U.S. This problem could be overcome by selling forward contracts. Another