国际财务管理课后习题答案chapter 8Word版Word文档格式.docx

国际财务管理课后习题答案chapter 8Word版Word文档格式.docx

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2.Discussandcomparehedgingtransactionexposureusingtheforwardcontractvs.moneymarketinstruments.Whendothealternativehedgingapproachesproducethesameresult?

Hedgingtransactionexposurebyaforwardcontractisachievedbysellingorbuyingforeigncurrencyreceivablesorpayablesforward.Ontheotherhand,moneymarkethedgeisachievedbyborrowingorlendingthepresentvalueofforeigncurrencyreceivablesorpayables,therebycreatingoffsettingforeigncurrencypositions.Iftheinterestrateparityisholding,thetwohedgingmethodsareequivalent.

3.Discussandcomparethecostsofhedgingviatheforwardcontractandtheoptionscontract.

Thereisnoup-frontcostofhedgingbyforwardcontracts.Inthecaseofoptionshedging,however,hedgersshouldpaythepremiumsforthecontractsup-front.Thecostofforwardhedging,however,mayberealizedexpostwhenthehedgerregretshis/herhedgingdecision.

4.Whataretheadvantagesofacurrencyoptionscontractasahedgingtoolcomparedwiththeforwardcontract?

Themainadvantageofusingoptionscontractsforhedgingisthatthehedgercandecidewhethertoexerciseoptionsuponobservingtherealizedfutureexchangerate.Optionsthusprovideahedgeagainstexpostregretthatforwardhedgermighthavetosuffer.Hedgerscanonlyeliminatethedownsideriskwhileretainingtheupsidepotential.

5.SupposeyourcompanyhaspurchasedaputoptionontheGermanmarktomanageexchangeexposureassociatedwithanaccountreceivabledenominatedinthatcurrency.Inthiscase,yourcompanycanbesaidtohavean‘insurance’policyonitsreceivable.Explaininwhatsensethisisso.

Yourcompanyinthiscaseknowsinadvancethatitwillreceiveacertainminimumdollaramountnomatterwhatmighthappentothe$/€exchangerate.Furthermore,iftheGermanmarkappreciates,yourcompanywillbenefitfromtherisingeuro.

6.RecentsurveysofcorporateexchangeriskmanagementpracticesindicatethatmanyU.S.firmssimplydonothedge.Howwouldyouexplainthisresult?

Therecanbemanypossiblereasonsforthis.First,manyfirmsmayfeelthattheyarenotreallyexposedtoexchangeriskduetoproductdiversification,diversifiedmarketsfortheirproducts,etc.Second,firmsmaybeusingself-insuranceagainstexchangerisk.Third,firmsmayfeelthatshareholderscandiversifyexchangeriskthemselves,renderingcorporateriskmanagementunnecessary.

7.Shouldafirmhedge?

Whyorwhynot?

Inaperfectcapitalmarket,firmsmaynotneedtohedgeexchangerisk.Butfirmscanaddtotheirvaluebyhedgingifmarketsareimperfect.First,ifmanagementknowsaboutthefirm’sexposurebetterthanshareholders,thefirm,notitsshareholders,shouldhedge.Second,firmsmaybeabletohedgeatalowercost.Third,ifdefaultcostsaresignificant,corporatehedgingcanbejustifiablebecauseitreducestheprobabilityofdefault.Fourth,ifthefirmfacesprogressivetaxes,itcanreducetaxobligationsbyhedgingwhichstabilizescorporateearnings.

8.Usinganexample,discussthepossibleeffectofhedgingonafirm’staxobligations.

Onecanuseanexamplesimilartotheonepresentedinthechapter.

9.Explaincontingentexposureanddiscusstheadvantagesofusingcurrencyoptionstomanagethistypeofcurrencyexposure.

Companiesmayencounterasituationwheretheymayormaynotfacecurrencyexposure.Inthissituation,companiesneedoptions,notobligations,tobuyorsellagivenamountofforeignexchangetheymayormaynotreceiveorhavetopay.Ifcompanieseitherhedgeusingforwardcontractsordonothedgeatall,theymayfacedefinitecurrencyexposure.

10.Explaincross-hedginganddiscussthefactorsdeterminingitseffectiveness.

Cross-hedginginvolveshedgingapositioninoneassetbytakingapositioninanotherasset.Theeffectivenessofcross-hedgingwoulddependonthestrengthandstabilityoftherelationshipbetweenthetwoassets.

PROBLEMS

1.CrayResearchsoldasupercomputertotheMaxPlanckInstituteinGermanyoncreditandinvoiced€10millionpayableinsixmonths.Currently,thesix-monthforwardexchangerateis$1.10/€andtheforeignexchangeadvisorforCrayResearchpredictsthatthespotrateislikelytobe$1.05/€insixmonths.

（a）Whatistheexpectedgain/lossfromtheforwardhedging?

（b）IfyouwerethefinancialmanagerofCrayResearch,wouldyourecommendhedgingthiseuroreceivable?

（c）Supposetheforeignexchangeadvisorpredictsthatthefuturespotratewillbethesameastheforwardexchangeratequotedtoday.Wouldyourecommendhedginginthiscase?

Solution:

（a）Expectedgain（$）=10,000,000（1.10–1.05）

=10,000,000（.05）

=$500,000.

（b）IwouldrecommendhedgingbecauseCrayResearchcanincreasetheexpecteddollarreceiptby$500,000andalsoeliminatetheexchangerisk.

（c）SinceIeliminateriskwithoutsacrificingdollarreceipt,Istillwouldrecommendhedging.

2.IBMpurchasedcomputerchipsfromNEC,aJapaneseelectronicsconcern,andwasbilled¥

250millionpayableinthreemonths.Currently,thespotexchangerateis¥

105/$andthethree-monthforwardrateis¥

100/$.Thethree-monthmoneymarketinterestrateis8percentperannumintheU.S.and7percentperannuminJapan.ThemanagementofIBMdecidedtousethemoneymarkethedgetodealwiththisyenaccountpayable.

（a）Explaintheprocessofamoneymarkethedgeandcomputethedollarcostofmeetingtheyenobligation.

（b）Conductthecashflowanalysisofthemoneymarkethedge.

（a）.Let’sfirstcomputethePVof¥

250million,i.e.,

250m/1.0175=¥

245,700,245.7

SoiftheaboveyenamountisinvestedtodayattheJapaneseinterestrateforthreemonths,thematurityvaluewillbeexactlyequalto¥

25millionwhichistheamountofpayable.

Tobuytheaboveyenamounttoday,itwillcost:

$2,340,002.34=¥

250,000,000/105.

Thedollarcostofmeetingthisyenobligationis$2,340,002.34asoftoday.

（b）

___________________________________________________________________

TransactionCF0CF1

____________________________________________________________________

1.Buyyensspot-$2,340,002.34

withdollars¥

245,700,245.70

2.InvestinJapan-¥

245,700,245.70¥

250,000,000

3.Payyens-¥

Netcashflow-$2,340,002.34

3.YouplantovisitGeneva,Switzerlandinthreemonthstoattendaninternationalbusinessconference.YouexpecttoincurthetotalcostofSF5,000forlodging,mealsandtransportationduringyourstay.Asoftoday,thespotexchangerateis$0.60/SFandthethree-monthforwardrateis$0.63/SF.Youcanbuythethree-monthcalloptiononSFwiththeexerciserateof$0.64/SFforthepremiumof$0.05perSF.Assumethatyourexpectedfuturespotexchangerateisthesameastheforwardrate.Thethree-monthinterestrateis6percentperannumintheUnitedStatesand4percentperannuminSwitzerland.

（a）CalculateyourexpecteddollarcostofbuyingSF5,000ifyouchoosetohedgeviacalloptiononSF.

（b）CalculatethefuturedollarcostofmeetingthisSFobligationifyoudecidetohedgeusingaforwardcontract.

（c）Atwhatfuturespotexchangeratewillyoubeindifferentbetweentheforwardandoptionmarkethedges?

（d）IllustratethefuturedollarcostsofmeetingtheSFpayableagainstthefuturespotexchangerateunderboththeoptionsandforwardmarkethedges.

（a）Totaloptionpremium=（.05）（5000）=$250.Inthreemonths,$250isworth$253.75=$250（1.015）.Attheexpectedfuturespotrateof$0.63/SF,whichislessthantheexerciseprice,youdon’texpecttoexerciseoptions.Rather,youexpecttobuySwissfrancat$0.63/SF.SinceyouaregoingtobuySF5,000,youexpecttospend$3,150（=.63x5,000）.Thus,thetotalexpectedcostofbuyingSF5,000willbethesumof$3,150and$253.75,i.e.,$3,403.75.

（b）$3,150=（.63）（5,000）.

（c）$3,150=5,000x+253.75,wherexrepresentsthebreak-evenfuturespotrate.Solvingforx,weobtainx=$0.57925/SF.Notethatatthebreak-evenfuturespotrate,optionswillnotbeexercised.

（d）IftheSwissfrancappreciatesbeyond$0.64/SF,whichistheexercisepriceofcalloption,youwillexercisetheoptionandbuySF5,000for$3,200.ThetotalcostofbuyingSF5,000willbe$3,453.75=$3,200+$253.75.

Thisisthemaximumyouwillpay.

4.BoeingjustsignedacontracttosellaBoeing737aircrafttoAirFrance.AirFrancewillbebilled€20millionwhichispayableinoneyear.Thecurrentspotexchangerateis$1.05/€andtheone-yearforwardrateis$1.10/€.Theannualinterestrateis6.0%intheU.S.and5.0%inFrance.Boeingisconcernedwiththevolatileexchangeratebetweenthedollarandtheeuroandwouldliketohedgeexchangeexposure.

（a）Itisconsideringtwohedgingalternatives:

selltheeuroproceedsfromthesaleforwardorborroweurosfromtheCreditLyonnaiseagainsttheeuroreceivable.Whichalternativewouldyourecommend?

Why?

（b）Otherthingsbeingequal,atwhatforwardexchangeratewouldBoeingbeindifferentbetweenthetwohedgingmethods?

（a）Inthecaseofforwa