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《Corporate Finance》公司理財 Stephen A.Ross 機械工業(yè)出版社 Chapter 31: International Corporate Finance 31.1 a. In direct terms, $1.6317 / Pound In 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 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 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 received will be SF148,301.94. = . We should sell dollars, because at the spot rate, it would be SF 149,454,49. e. Let be the spot rate of currency X for Y f. Both banks reduce their exposure to foreign exchange risk. If a bank finds another bank with a complimentary mismatch of cash flows in terms of foreign currencies, it should arrange a swap since both banks’ cash flows would be more closely matched. 31.2 a. It is easiest to see this by considering from the point of view of the DM: and write as the inverse: Then write as a ratio: For no arbitrage, the quote for must be 2.0, but instead it is 1.8. Therefore, an arbitrage opportunity does exist. b. Similarly, 100 / 2 = 50, and the quote is 50/DM, so arbitrage does not exist c. and , but the quote is 14/HKD, meaning arbitrage does exist 31.3 a. False. On the contrary, according to Relative Purchasing Power Parity, an expectation of higher inflation in Japan should cause the yen to depreciate against the dollar. b. False. Assuming that the forward market is efficient, any expectation of higher inflation in France should be reflected in discounted French francs in the forward market. Therefore, no protection from risk would be available by using forward contracts. c. True. The fact that other participants in the market do not have information regarding the differences in the relative inflation rates in the two countries will make our knowledge of this fact a special factor that will make speculation in the forward market successful. 31.4 The approximation formula given in the text is: Then, So, the spot rate at year end is 31.4 (continued) 31.5 a. The Interest-rate parity theorem specifies: where: In this case, we have (and solving for the forward rate): Since is $/FF, we must take the inverse of the quote given in the problem, so Since are specified in the problem annually and we want the 3-month forward rate, we must find the 3-month interest rates, so: So, now we have: Convert this back to FF/$ (1/0.16544) and we get FF 6.04/$ b. Enter the buy-side position of a 3 month FF forward contract worth 1,000,000 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. 31.6 a. Compare the end-of-period investment value of each country: Investment in the U.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 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: where: Instead of interpreting the period as 1 month as before and in the text, we can interpret it as 1 year. Then we have c. 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 value to hedging the currency exposure. 31.7 a. One possible reason investment in the foreign subsidiary might be preferred is if this investment provides direct diversification that shareholders could not attain by investing on their own. Another reason could be if the political climate in the foreign country was more stable than in the home country. Increased political risk can also be a reason you might prefer the home subsidiary investment. Indonesia can serve as a great example of political risk. If it cannot be diversified away, investing in this type of foreign country will increase the systematic risk. As a result, it will raise the cost of the capital, and could actually decrease the NPV of the investment. b. First, we need to forecast the future spot rates for the next 3 years. From interest rate and purchasing power parity, the expected exchange rate is Similarly, Now, use these future spot rates to estimate the future cash flows in dollars, and discount those dollar cash flows: c. 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, 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 way of overcoming this problem would be to borrow in the country where the project is located. 31.8 a. Euroyen is yen deposited in a bank outside Japan. b. False. If the financial markets are perfectly competitive, the difference between the Eurodollar rate and the U.S. rate will be due to differences in risk and government regulation. Therefore, speculating in those markets will not be beneficial. c. The difference between a Eurobond and a foreign bond is that the foreign bond is denominated in the currency of the country of origin of the issuing company. Eurobonds are more popular than foreign bonds because of registration differences. Eurobonds are unregistered securities. d. A foreign bond. In this particular case, a Yankee bond. 《Corporate Finance》公司理財 Stephen A.Ross 機械工業(yè)出版社 B-463