Assignment

1.) ABC Company exports a $5,000,000 piece of capital equipment to a Russian company. The term of the sale is immediate delivery which probably means payment in 8 days but you build another 5 days into the expectation just in case. EXIM is willing to guarantee. Acceptance commissions are currently at 2.5% flat. LIBOR is at 4.35% and is the cost of Funds and your minimum margin over LIBOR is 35 basis points.. Confirmation Costs are 8.5 basis points flat detail the transaction using a letter of credit and EXIM's involvement. What would be your "take home receivable" today. Also, what can your commercial bank handling the transaction do, what would be their investment opportunity given the LIBOR quote, what would they receive and when.

This question involves all elements of a trade/investment opportunity, please be sure to involve all of those elements.

Flat means no adjustment for time Remember, if you want the money today it is the present value (discount rate. Be complete and explain your answer.

2.) A British firm has a subsidiary in the U.S., and a U.S. firm, known to the British firm, has a subsidiary in Britain. Define and then provide an example for each of the following management techniques for reducing the firm's operating cash flows. The following are techniques to consider:

a) matching currency cash flows
b) risk-sharing agreements
c) back-to-back or parallel loans

3.) In the case of international trade, the risk of nonpayment is essentially eliminated with the use of a letter of credit issued through a trustworthy bank. Explain the difference between a trustworthy and a non-trustworthy bank. Hint: This question can relate to political and Sovreign issues as well as commercial issues.