The benefits that enjoyed by investors due to existence of organized security exchanges
e.g. Nairobi Stock Market are:
- The firms are able to issue new shares and raise capital easily
- The exchange is a vehicle of mobilizing savings in the economy
- Since investors can buy new shares, this enable them to diversify their
investments and reduce risk
- It is a means through which foreign direct investment (FOI) can flow into the economy
- Investors are able to know the price of their securities as determined by
demand and supply forces in the stock exchange.
- Since investors cannot buy or sell shares themselves, they interact with
stockbrokers and get investment advice.
Kavungya answered the question on December 14, 2021 at 07:51
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Required:
(a) Explain the main types of...(Solved)
You have been retained by the management of an international group to advise on the management of its
foreign exchange exposure.
Required:
(a) Explain the main types of foreign exchange exposure
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(B). The company thinks that...(Solved)
ABC Ltd a UK firm has been invited to tender for a contract in Blueland with the local currency of Blues
(B). The company thinks that the contract should cost £1 850, 000 and is prepared to price the contract
at £2 million. The current exchange rate for Blues and £ is £1: B2.80. The company therefore bids for
B5.6 million. The contract will not be awarded until after six months. A 6 month currency option to sell
B5.6 million at an exchange rate of £1: B2.8 is currently costing £40 000.
ABC Ltd can either buy the option or enter into forward Exchange contract at a rate of £1: B 2.80,
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Required:
Advice the company on which alternative is better.
Date posted: April 15, 2021. Answers (1)
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The company finance...(Solved)
XYZ Ltd, a UK firm has bought goods from a US supplier and must pay USD 4 million in 3 months time.
The company finance director wishes to hedge against the foreign exchange risk and is considering 3
methods:
- Using the forward exchange contract
- Using the money market hedge
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Required
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Date posted: April 15, 2021. Answers (1)
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Spot rate £1: USD1.635 - USD 1.6385
One month forward...(Solved)
Assume that the following quotation is given:
Spot rate £1: USD1.635 - USD 1.6385
One month forward 0.5 – 0.47 cents premium
Required:
Compute the cost of the forward cover for a customer
Buying dollars 1 month forward.
Selling dollars one month forward.
Date posted: April 15, 2021. Answers (1)
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3 months forward rate £1: F2207 – 2222
Required:
1. Determine the amount required in sterling pound to buy 2 million foreign currencies
• At the spot
• In 3 months time under the forward exchange contract.
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Date posted: April 15, 2021. Answers (1)
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Date posted: April 15, 2021. Answers (1)
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Date posted: April 15, 2021. Answers (1)
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Assume that the direct quote between the USD and £ is £1 = USD 1.5 and that the inflation rate in UK is
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Required
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Dimango Company is considering whether it would be financially advisable to retire its existing long term
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If the company decides to redeem the loan, there is an early payment penalty amounting to 10% of the loan.
A new Sh 10 million loan can be raised at 13% per annum for a ten year period. It is expected that
underwriting costs will amount to Sh 600,000. In addition to these costs, the company will be further
required to pay interest for the two months which would allow the normal interest payment due to be
reached for the old loan.
Dimango Company is in the 40% income tax bracket.
Required:
(a) Calculate the net amount of cash investment required for the refunding of the loan.
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Date posted: April 15, 2021. Answers (1)
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The company then proposed a 1 for 4 rights issue with an issue price of £1.50. The money raised would be
used to finance a major new project, which was expected to increase annual profits after taxation by
£950,000. This information is released together with the announcement of rights issue.
Required:
(a) Compute the cum-right price at the eve-of the rights issue
(b) Compute the theoretical ex-rights price
(c) Calculate the market price per share at the time of the rights issue if the money raised was to be used
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Date posted: April 15, 2021. Answers (1)
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Date posted: April 14, 2021. Answers (1)
- Assume that the following information has been obtained:
P = Sh 20
X = Sh 20
t = 3 months (0.25 years)
KRF = 12%
d² = 0.16
Determine the value...(Solved)
Assume that the following information has been obtained:
P = Sh 20
X = Sh 20
t = 3 months (0.25 years)
KRF = 12%
δ² = 0.16
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Date posted: April 14, 2021. Answers (1)
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Required:
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b. Compute the PV of the cash out flow under lease financing
c. Calculate the annual loan installment payment
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Date posted: April 14, 2021. Answers (1)