Sep 21, 2017 term paper 2


This paper concentrates on the primary theme of AN AMERICAN MANUFACTURING COMPANY HAS IMPORTED INDUSTRIAL MACHINERY AT A PRICE OF DM4.6 MILLION…. in which you have to explain and evaluate its intricate aspects in detail. In addition to this, this paper has been reviewed and purchased by most of the students hence; it has been rated 4.8 points on the scale of 5 points. Besides, the price of this paper starts from £ 40. For more details and full access to the paper, please refer to the site.

An American manufacturing company has imported industrial machinery at a price of DM4.6 million. The machinery will be delivered and paid for in six months. For planning purposes, the American company wants to establish what the payment (in dollars) will be in six months. It decides to use the forward market to accomplish its objective. The company contacts its New York bank, which provides the quotations given in Table Q22.2. The bank states that it will charge a commission of 1% on any transaction.

a) Does the American company enter the forward market to go long or short of forward DM?

b) What is the number of DM/$? What is the dollar value of the deutsche mark?

c) What is the equilibrium forward rate for the deutsche mark expressed as DM/$?

d) Does the commission increase or decrease the number of DM/$ in the transaction?

e) What price in dollars can the American company establish by using the forward market in deutsche marks?

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