Currency Swaps and Interest Rate Derivatives

1. At present, LIBOR3 is 7.93% and LIBOR6 is 8.11%. What is the forward rate for a LIBOR3 deposit to be placed in three months? 2. Company A, a low-rated firm, desires a fixed-rate, long-term loan. A currently has access to floating interest rate funds at a margin of 1.5% over LIBOR. Its direct borrowing cost is 13% in the fixed-rate bond market. In contrast, company B, which prefers a floating-rate loan, has access to fixed-rate funds in the Eurodollar bond market at 11% and floating-rate funds at LIBOR + ½ %. a. How can A and B use a swap to advantage? b. Suppose they split the cost savings. How much would A pay for its fixed-rate funds? How much would B pay for its floating-r... click for more

NAFTA and ACME Motors

Prior to the North American Free Trade Agreement (NAFTA), the Mexican automotive industry was only partially integrated with the North American automotive industry. Many automotive Maquiladoras (Mexican industrial plants that assemble imported components into products for export) were owned by U.S. assemblers and parts producers. However, due to Mexico’s Automotive Decree, U.S. auto manufacturers in Mexico were obligated to export significantly more than they imported. So, most of the production was exported to the U.S. and Canada. In addition to this imbalance of trade, U.S. automakers in Mexico were required to purchase a large percentage of the raw materials for manufacturing the vehicles... click for more

Locate an article pertaining to a change in the supply, demand, and pricing

Locate an article pertaining to a change in the supply, demand, and pricing of a particular product or service. Utilizing the economic theories, prepare a paper in which you summarize the article and explain why changes occurred in supply, demand, and price.

Climate of importing into Indonesia

Marketing managers feel it is first important to get an idea of the climate in the country towards foreign trade and investment. Analyze Indonesia's trade policies as to how they promote and/or restrict international trade. Determine whether these policies include any of the following: Subsidies Export financing Foreign trade zones Tariffs Import Quotas Embargoes Local content requirements Administrative fees and bureaucratic delays Currency controls Explain the cultural, political, and economic reasons behind these policies. . Cite your sources in your analysis. Discuss trade patterns. Explain the methods governments use to promote and restrict international tra... click for more

International Finance

1. China is a manufacturing superpower. Assume that you are CFO of an automobile manufacturer looking to build a $U.S.800 million plant in China. Thoroughly discuss each of the factors that should determine the appropriate required return on this investment opportunity. Your discussion about China should begin with a full, clear and logical explanation of the theory behind the concept of "required return." 2. Make an estimate of the required return, starting with a 12% weighted average cost of capital for the U.S. auto manufacturer, and adding reasonable estimated percentages for each of the separate risk elements you can foresee.