>
What is the current (April) exchange rate? How many Canadian dollars would be exchanged to meet its accounts payable obligation to the hotels at the current exchange rate?
What has been happening to the exchange rate over the past several years? What impact would this have on the cost of the hotel rooms in Canadian dollars?
Suppose VS decides to pay its bills under the spot rate in October. Determine the cost in Canadian dollars under each of the following exchange rates:
$.6298 = 1CAD $.60 = 1 CAD $.625 = 1 CAD $.65 = 1 CAD $.675 = 1 CAD
Suppose VS decides to utilize a forward contract at the six-month forward rate of $.6271 = 1 CAD. Determine the cost in Canadian dollars.
What is the advantage of the forward contract? What is the potential disadvantage?
Give an example of where the forward contract would have proven to be a mistake for VS.
Suppose VS decides to borrow Canadian dollars, use them to purchase U.S. dollars, invest the U.S. dollars for six months, and then use the principal and interest to pay the hotels in October. At an annual interest rate on deposits of 1.65%, how much money in U.S. dollars will VS have to deposit in April to have $60 million in October?
Based on your answer to question #8, how much will it cost VS in Canadian dollars to purchase these U.S. dollars in April?
Because VS will borrow the Canadian dollars necessary to purchase the U.S. dollars at an annual interest rate of 2.7%, how much will VS be obligated to pay to the Canadian bank (principal plus interest) in October?
Based on what you00e read in the case, is the forward rate consistent with the theory of interest rate parity? Explain.
Which of the three options do you recommend, and why?
CASE
STUDY: VOYAGES SOLEIL
What is the current (April) exchange rate? How many Canadian dollars would be exchanged to meet its accounts payable obligation to the hotels at the current exchange rate?
What has been happening to the exchange rate over the past several years? What impact would this have on the cost of the hotel rooms in Canadian dollars?
Suppose VS decides to pay its bills under the spot rate in October. Determine the cost in Canadian dollars under each of the following exchange rates:
$.6298 = 1CAD $.60 = 1 CAD $.625 = 1 CAD $.65 = 1 CAD $.675 = 1 CAD
Suppose VS decides to utilize a forward contract at the six-month forward rate of $.6271 = 1 CAD. Determine the cost in Canadian dollars.
What is the advantage of the forward contract? What is the potential disadvantage?
Give an example of where the forward contract would have proven to be a mistake for VS.
Suppose VS decides to borrow Canadian dollars, use them to purchase U.S. dollars, invest the U.S. dollars for six months, and then use the principal and interest to pay the hotels in October. At an annual interest rate on deposits of 1.65%, how much money in U.S. dollars will VS have to deposit in April to have $60 million in October?
Based on your answer to question #8, how much will it cost VS in Canadian dollars to purchase these U.S. dollars in April?
Because VS will borrow the Canadian dollars necessary to purchase the U.S. dollars at an annual interest rate of 2.7%, how much will VS be obligated to pay to the Canadian bank (principal plus interest) in October?
Based on what you00e read in the case, is the forward rate consistent with the theory of interest rate parity? Explain.
Which of the three options do you recommend, and why?
download CASE STUDY: VOYAGES SOLEIL How much money in US dollars must ...
