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Final Test

In: Business and Management

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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]

2) Discutir situación de Grecia y el Euro Desde el otoño de 2009, la Unión Europea ha estado luchando con una crisis de movimiento lento, pero firme en las enormes deudas que enfrentan sus economías más débiles, como Grecia y Portugal, o las más maltratadas por la recesión mundial, al igual que Irlanda. Una serie de negociaciones, rescates y planes de austeridad no han logrado detener la caída de la confianza de los inversores o para restaurar el crecimiento necesario para dar a los países que luchan por una forma de salir de las trampas de la deuda. En agosto de 2011 los líderes europeos se encontraron luchando una vez más a intervenir en los mercados, esta vez para proteger a Italia y España, dos países considerados como demasiado grandes para rescatarlos. La crisis ha producido las más profundas tensiones dentro de la unión en la memoria, como Alemania, en particular, se ha resistido a la ayuda a los países que lo ve como libertino, y ha planteado dudas sobre si el euro puede sobrevivir como una moneda multinacional, ya que países como Grecia, han sido incapaces de impulsar sus exportaciones por la devaluación de su moneda. Una intervención a regañadientes, indirecta por el Banco Central Europeo a finales de 2011 llevó a la crisis de la fiebre que se enfríe considerablemente, ya que prestó grandes sumas de dinero a los bancos en condiciones favorables para evitar una crisis de liquidez. Pero la crisis ha dado paso a una realidad de molienda para Europa del estancamiento económico, e incluso, durante gran parte del continente, el fantasma de otra crisis a menos de tres años después de la última recesión terminó. Una reunión en la cumbre europea que había mirado a ser sorprendentemente la rutina después de dos años de crisis, sin embargo terminó con otra prueba para la credibilidad de la zona euro, como España, anunció que una profundización de la recesión significaba que tendría que abandonar sus objetivos de reducción del déficit para el año 2012. Grecia dijo que se había asegurado un acuerdo de reestructuración de la deuda histórica con sus prestamistas del sector privado. El acuerdo allana el camino para la liberación de los fondos de rescate de Europa y el Fondo Monetario Internacional que salvará al país de la quiebra inminente. El griego del Ministerio de Finanzas dijo que el 85.8 por ciento de los acreedores privados que 177 millones de euros en bonos griegos participaron en el canje de bonos. Después de la invocación de cláusulas de acción colectiva, las disposiciones que obliguen a los holdouts para aceptar la oferta, la tasa de participación se elevaría a 95 por ciento y cumplir el objetivo fijado por Europa y el FMI para la liberación de los fondos de rescate cruciales. Después de meses de tortuosas negociaciones y tensa, un segundo rescate para Grecia, finalmente se hizo realidad cuando países de la zona euro aprobado formalmente el plan y autorizó el desembolso del primer préstamo miles de millones de euros. El plan está valorado en 130 millones de euros ($ 170 millones de dólares).
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.
Financial Accounting Standards Board. Investopedia (2012). Retrieved from http://www.investopedia.com/terms/f/fasb.asp#axzz1pDEEPm6x
Monetary/Non-monetary Method. Financial Terms (2012). Retrieved from http://www.finance-lib.com/financial-term-monetary-non-monetary-method.html

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