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# Final Test

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FIN/GM571 INTERNATIONAL CORPORATE FINANCE

FINAL TEST: TAKE HOME

(FOR POINTS YOU MUST: Explain your answer in essay format- ample use of references and APA is expected- detailed the calculations as you do in any other task)

1) 50 POINTS. Your company is considering investing (selling or buying) \$150 millions Eurodollars in order to hedge against a payment due in 6 months for the same amount. There are also considering the alternative of an FRA. If the agreement rate is 4.5%, actual days in the periods are 92 and the settlement rate is 4.25%. How much money will your firm earn (or pay) in the future? Compare both instruments and recommend buying or selling.

\$150,000,000 92 days 4.50% agreement rate (nominal)

[pic]

3) 10 POINTS. This is taken from the actual announcement of a local Bank. Payment
Example: A fixed rate mortgage of \$ 100,000 with an interest rate of 6.5% and 6.61% APR will have 360 monthly payments of principal and interest of \$ 632. Payments rounded to the nearest dollar. Confirm the result, identified the necessary factors with the notation used in class, detailed the calculations. Explain any difference.

Present value= \$100,000 Interest rate 6.5% N= 360 months

100,000 (A/P, 6.5% /12, 360)= 100,000 X 0.006321 Pmt = \$632.07

4) 20 POINTS. Currency swap between two “unequally situated” banks; BANK A will get 60% and Bank B 40%. Calculate the spread and set up the swap when

|Interest |BANK A |BANK B |
|FIXED |9% |12% |
|VARIABLE |1% + LIBOR |2% + LIBOR |

|Interest |BANK A |BANK B |Differential | |
|FIXED |9% |12% |3% | |
|VARIABLE |1% + LIBOR |2% + LIBOR |1% | |
| | | |2% |QSD |
| | | | | |
|Pays |9% |9% | | |
| |1% + LIBOR |2% + LIBOR | | |
|Receives |9% |LIBOR | | |
| | | | | |
|Net |LIBOR - 1% |11% | | |
| | | | | |
| | | | | |

5) 5 POINTS. Discuss (you might use an example) the concepts of arbitrage, broker and dealer.

El arbitraje es un proceso de solución de controversias, que es una alternativa a la tradicional demanda en la corte. En lugar de tener un asunto resuelto por un juez y un jurado, los participantes en un procedimiento de arbitraje que sus disputas sean resueltas por personas imparciales que son expertos en las áreas en controversia. Aquellas personas que se llaman árbitros. Aunque el arbitraje y la mediación han existido como mecanismos de solución de controversias para más de 200 años, no fue hasta la decisión de la Corte Suprema de Estados Unidos, en Shearson contra MacMahon, 482 EE.UU. 220 (1987) que el arbitraje se convirtieron en los medios más utilizados para solución de controversias en la industria de valores. Arbitraje de las controversias corredores de bolsa ha sido utilizado como una alternativa a los tribunales porque es un medio rápido y económico para resolver problemas complicados. Existen leyes específicas que rigen la conducta de un procedimiento de arbitraje, tanto del gobierno federal y los diversos estados. Uno de los aspectos legales más importantes del arbitraje es que los laudos arbitrales serán definitivos y obligatorios, sujetos a revisión por un tribunal sólo sobre una base muy limitada. Las Partes deben reconocer, también, que en la elección de arbitraje como un medio para resolver un litigio, por lo general, renunciar a su derecho a llevar el asunto ante los tribunales. Técnicamente, un corredor es sólo un agente que ejecuta órdenes por cuenta de clientes, mientras que un distribuidor actúa como un director de operaciones y para su propia cuenta. Debido a que la mayoría de casas de bolsa actuar como ambos corredores y directores, el término sociedad de valores se utiliza comúnmente para describirlos.

Referencias:
Emery, D.R., Finnerty, J.D., & Stowe, J.D. (2007). Corporate financial management (3rd Ed.). Upper Saddle River, NJ: Pearson-Prentice Hall.
Eun, C.S., & Resnick, B.G. (2007). International financial management (4th Ed.). New York, NY: McGraw-Hill.

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