Answers
I know this is a dumb question, but I am preparing a paper and I am given the "outright forwards" aka "yen long dated foreign exchange forwards" bid and ask rates.
Can I use these rates to forecast for options and futures? In my analysis, forwards are not desirable at this time so I want to calculate a future contract and an option contract versus the forward contract.
It is late, my paper is due tomorrow evening and I am totally lost!!
HELP! Thank you!
You can find your solution regarding this in:
http://aboutforextradingcrunch.blogspot. com/
www.easy-forex.com Provides an online foreign exchange trading system which includes forex charts, analysis, and forecasts. Exchange rates, news ...
Navigation Systems Inc. now has total worldwide revenues of over $500 million forecast for this coming year. You have operations in the United States of $300 million with a 12% ROS (return on sales), operations in Germany of €100 million with a return on sales (ROS) of 11%, and operations in Shanghai, China of 650 million yuan with an ROS of 9%. You expect to repatriate all the ROS to the U.S. when available in 12 months. Determine the spot and 12-month forward exchange rates and determine any change in the ROS repatriated in 12 months based on exchange rates versus the current forecast. Describe the repatriation using a spot transaction, an outright forward, and a foreign-exchange swamp. Would there be any use or benefit in using a currency option or currency swaption? Describe each. How would you advise the company to handle the repatriation?
I would tell the company to hire an "advisor" and some corporate lawyers.
1.Financial management is concerned with the maintenance and creation of wealth.
2.The current ratio and the acid test ratio are both measures of financial leverage.
3.Sales occurring in the secondary markets increase the total stock of financial assets that exist in the economy.
4.The key ingredient in a firm’s financial planning is the sales forecast.
5.The present value of an annuity increases as the discount rate increases.
6. As the volume of production increases, the fixed cost per unit of the product decreases.
7.Whenever the IRR on a project equals that project’s required rate of return, the NPV equals zero.
8.The hedging principle involves matching the cash flow from an asset with the cash flow requirements of the financing used.
9.Because they operate within a highly uncertain environment, utilities hold a large percentage of their total assets in cash.
10.Accounts receivable are an asset that reflects sales made on credit.
11.Working capital for a project includes investment in fixed assets.
12.Sales captured from the firm’s competitors can be relevant to the capital-budgeting decision.
13.The weighted average cost of capital is the minimum required return that must be earned on additional investment if firm value is to remain unchanged.
14.The firm financed completely with equity capital has a cost of capital equal to the required return on common stock.
15.Financial structure includes long-term and short-term sources of funds.
16.Real assets should be financed with temporary capital due to the short-term nature of depreciation expense.
17.The nature of a firm’s assets has a major influence on the types of financial capital a firm uses.
18.Compared with other developed countries, the U.S. is particularly reliant on foreign trade for self-subsistence.
19.The foreign exchange market is similar in form to the New York Stock Exchange.
20.The efficiency of foreign currency markets is ensured, in large measure, by the process of arbitrageurs.
21.Foreign currency forward rates aid traders by reducing uncertainty regarding future market fluctuations.
22.Capital markets in foreign countries in general are becoming more integrated due to the widespread availability of interest rate and currency swaps.
Asia faces 'rough ride,'
Singapore's leader says
By ALEX KENNEDY,Associated Press Writer AP -
SINGAPORE - Asian economies face a "rough ride" for at least the next year as weakening consumer demand from developed countries hurt the region's exports, Singapore Prime Minister Lee Hsien Loong said Friday.
"The world is caught up in a financial storm, and dark clouds fill our immediate horizon," Lee said in a speech in Singapore. "The fear and panic gripping financial markets everywhere will take time to subside."
Asian stock indexes have plummeted this week along with their counterparts in the U.S. and Europe on fears turmoil in the financial system will spark a global recession. Japan's benchmark Nikkei 225 index tumbled as much as 11 percent Friday while Hong Kong's Hang Seng index was down more than 7 percent.
"Asian countries cannot avoid the impact of weakening U.S., European and Japanese economies," Lee said "We must prepare for a rough ride at least over the next year, and quite possibly longer."
"The crisis in the financial system will dampen consumption and investment in the developed countries and affect growth all over the world," he said.
Singapore's economy, which relies heavily on exports, contracted 0.5 percent in the third quarter, the government said Friday. The government also said it cut its 2008 forecast for economic growth to 3 percent from between 4 percent and 5 percent.
The central bank, known as the Monetary Authority of Singapore, said in a statement Friday it shifted it's foreign exchange policy to a "zero percent appreciation" of the Singapore dollar from a "modest and gradual appreciation" in a bid to boost the competitiveness of the country's exports.
Lee's comments contrast with the more upbeat outlook offered by Asian Development Bank Haruhiko Kuroda on Thursday, when he said Asia's financial system appears to be little affected by the U.S. sub-prime mortgage problems and that Asia overall will enjoy robust growth.
"The impact on the financial sector in Asia is limited this time," ADB President Haruhiko Kuroda told a news conference in Tokyo Thursday. "We expect a fairly robust growth to continue, although we expect the growth rate would be smaller."
They are smart for doing this, even though the appreciation value is not much at this moment that will surely change since economies are cyclical in nature as is the environment. It is smart even for american to buy those two commodities at this time. Interest rates and overall prices are low at this moment, so investing in a home now and selling later will result in a greater augmenting return.
Dollar Declines Against Pound, Kiwi on Interest-Rate Outlook
Oct. 21 (Bloomberg) -- The dollar declined versus the pound and New Zealand’s currency on speculation the Federal Reserve will trail other central banks in increasing borrowing costs as the global economy recovers.
Sterling rose to a five-week high after Bank of England Governor Mervyn King wrote in a newspaper opinion piece that “it would be wise” to take into account the prospect of higher interest rates. New Zealand’s dollar climbed to the strongest level since July 2008 as Reserve Bank Governor Alan Bollard said currency strength won’t forestall higher borrowing costs.
“The Fed is a possible candidate of being the last to raise rates,” said Matthew Strauss , a senior currency strategist in Toronto at RBC Capital Markets Inc., a unit of Canada’s biggest bank by assets. “Divergence will be the key driver for currencies.”
The dollar weakened 1.3 percent to $1.6590 per pound at 9:22 a.m. in New York, from $1.6382 yesterday. It touched $1.6599, the weakest level since Sept. 15. The dollar slid 0.4 percent to 75.23 U.S. cents against New Zealand’s currency, from 74.96 cents. It reached 75.77 cents, the weakest since July 2008. The U.S. currency gained 0.5 percent to 91.24 yen, from 90.78. The euro was little changed at $1.4944.
Sumfolio » FOREX/METALS Forecasts: Friday, October 23rd, 2009
The U.S. dollar mostly helpless motive on Thursday but not before spending some stretch before during the day on worse than expected unemployment claims hearsay from last week. Claims were expected to be 516k last week, down from 520k the week former, but indeed gained 11k to 531k. This is indubitably why stocks opened and traded discount earlier in the day. In other fundamentals word, the College Management’s Supreme Index finger improved more than anticipated at 1.0% rather than 0.9%, a dictatorial deliver of pecuniary progress. British retail sales worsened in October while Canadian centre and non-gist retail sales improved in August.
U.S.-based clich indices traded lower earlier Thursday but steadily rose throughout the doze of trading. All three indices improved on the day, led by the Dow Jones Industrial Usual(^DJI), which added 1.33% to 10,081.31 while the S&P 500 (^INX) added 11.51 points to 1,092.91 and the Nasdaq Composite (^IXIC) picked up 14.56 points to reach 2,165.29. The pecuniary sector seemed the strongest, led by grievous trading of Bank of America (BAC), including a mid-day gamble. The cost of both an ounce of gold and natural oil for November transportation decreased today, by 0.55% to $1057.80 and 0.22% to $81.19.
Our forecasts for tomorrow foretell mostly contradictory trading for the dollar with gains against the Canadian dollar and British beat out. Much of our trading seems to portend turbulant late-day trading, especially the Canadian dollar and Japanese yen. A solid amount of fundamentals scandal, exceptionally from Europe, will around out the trading of the end of the week, solely several manufacturing and services Purchasing Penalty Indices. Also, Grievous Britain will notice its preparation 3rd Favour GDP information and the U.S. will unchain existing hospice sales information, expected to overhaul for September.
CURRENCY FORECASTS
For each double of graphs, the red graph depicts Thursday’s currency forecast and present currency observations while the auspicious graph depicts Friday’s currency forecast. Rural is Thursday’s forecast; red is Thursday’s genuine trading evidence; and morose is Friday’s forecast. The heretofore is GMT +1, also known as the occasion in Western Europe or 6 hours in front of Eastern Exemplar Period. In other words, the forecasts grant from 6:00 PM Thursday to 5:59 PM Friday Eastern Criterion Things. We slate the text based on military hour. Thus, our graphs upon with 18:00 or 6:00 PM today and hold out until 17:59 the next day.
...News
BOC: Intervention in Foreign-Exchange Market 'An Option'Wall Street Journal - Oct 22, 2009
CBC.caBOC: Intervention in Foreign-Exchange Market 'An Option'OTTAWA -- Bank of Canada Governor Mark Carney said Thursday that intervention in the foreign-exchange market is "always an option" to lower Canada's Dollar Weakens as Bank Governor Says It's Too StrongCanadian dollar set to ignore tough central bank talkMarket watchers wary of dollar's shine - -all 1,271 news articles »
Bloomberg - Oct 23, 2009
Purchases jumped 9.4 percent to a 5.57 million annual rate, more than forecast and following a 5.09 rate in August, the National Association of Realtors and more »Bloomberg - Oct 21, 2009
Telegraph.co.uk things difficult for their economy,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France's third-largest bank. WORLD FOREX: Euro Takes A Breather, But On Track To $1.50CURRENCIES: Dollar Rebounds From 14-month Low Versus EuroCURRENCIES: Dollar Hits New 14-month Low Versus Euroall 960 news articles »
International Business Times - Oct 23, 2009
MiamiHerald.comPurchases jumped 9.4 percent to a 5.57 million annual rate, more than forecast and following a 5.09 rate in August. The greenback rallied against sterling Yuan Peg Spurs Exports, Luring Pimco as Dollar Sinksthe energy report - Can't get any respectDaily Foreign Exchange Market Summary 22/10/2009all 281 news articles »
Bloomberg - Oct 24, 2009
Colombia's Peso Drops Before Bank Decision; Chile Peso Gains either an interest-rate cut or capital controls.” Cortes forecasts the central bank will opt to buy dollars directly in the foreign-exchange market. and more »