Question Details

Answered: - 1. Assume your company has a contract to purchase 100 computers


1. Assume your company has a contract to purchase 100 computers from a Korean company. The paymentis due on receipt of the shipment and must be delivered in Korea on 1 December 2016. On 1 July 2016,when you are arranging the contract, the computers are priced at 500,000 won each. On 1 July 2016, thespot exchange rate is AU$1 in exchange for 1,250 won (KRW). Assume that the 6-month interest ratein Korea is 3% and the rate in Australia is 5%. Assume that the covered interest parity holds.

(A) Calculate the Australian dollar price (on 1 July 2016) of one unit of Korean currency (rounding to4 decimal places). [5 marks]


(B) What is the total price of the computers in Australian dollars on 1 July 2016 (rounding to 2 decimalplaces)? [5 marks]


(C) Calculate the 6-month forward exchange rate, FKRW/$, under the covered interest parity (roundingto 2 decimal places). Note that the forward rate is defined as the Korean won per AU$1.Hint: Use the CIP equation. [7 marks]


(D) What would you advise your firm to do to avoid a loss on the deal if the Korean won costs 5% morecompared to the Australian dollar (the expected depreciation rate of Australian dollar againstKorean won is 5%) when payment is due on 1 December 2016? The answer should have the exactnumbers (rounding up to 2 decimal places) that you would tell your CEO.Hint: You want to get rid of the exchange rate risks. (12 marks)








 

Solution details:
STATUS
Answered
QUALITY
 Approved
ANSWER RATING

This question was answered on: Oct 07, 2020

PRICE: $15

Solution~0002193923.zip (25.37 KB)

Buy this answer for only: $15

This attachment is locked

We have a ready expert answer for this paper which you can use for in-depth understanding, research editing or paraphrasing. You can buy it or order for a fresh, original and plagiarism-free copy (Deadline assured. Flexible pricing. TurnItIn Report provided)

Get this solution for only: $
Pay using PayPal (No PayPal account Required) or your credit card . All your purchases are securely protected by .
SiteLock

About this Question

STATUS

Answered

QUALITY

Approved

DATE ANSWERED

Oct 07, 2020

EXPERT

Tutor

ANSWER RATING

GET INSTANT HELP/h4>

We have top-notch tutors who can do your essay/homework for you at a reasonable cost and then you can simply use that essay as a template to build your own arguments.

You can also use these solutions:

  • As a reference for in-depth understanding of the subject.
  • As a source of ideas / reasoning for your own research (if properly referenced)
  • For editing and paraphrasing (check your institution's definition of plagiarism and recommended paraphrase).
This we believe is a better way of understanding a problem and makes use of the efficiency of time of the student.

NEW ASSIGNMENT HELP?

Order New Solution. Quick Turnaround

Click on the button below in order to Order for a New, Original and High-Quality Essay Solutions. New orders are original solutions and precise to your writing instruction requirements. Place a New Order using the button below.

WE GUARANTEE, THAT YOUR PAPER WILL BE WRITTEN FROM SCRATCH AND WITHIN YOUR SET DEADLINE.

Order Now