1. Measuring movements in exchange rates The following table shows hypothetical monthly exchange rates for the Canadian dollar and the euro, as well as the standard deviation of the percentage changes for each currency. Use the table to select the percent change from March 1 to April 1 in the Canadian dollar exchange rate and the euro exchange rate. Value of the Canadian Dollar Month January 1 February 1 March 1 April 1 May 1 June 1 July 1 Standard Deviation (US Dollars per Canadian Dollar) $0.62 0.63 0.64 0.66 0.67 0.65 0.66 In this example, the value of the Monthly Percent Change in Canadian Dollar Value 1.61% 1.59% 1.52% -2.99% 1.54% 2.08% The percentage change in the Canadian dollar from March 1 to April 1 represents Value of Euro (US Dollars per euro) $1.14 1.16 1.18 1.15 1.13 1.15 1.16 a depreciation no change an appreciation was more volatile over the entire time period. Monthly Percent Change in Euro Value 1.75% 1.72% -1.74% 1.77% 0.87% 1.94% in the value of the Canadian dollar.

1. Measuring movements in exchange rates The following table shows hypothetical monthly exchange rates for the Canadian dollar and the euro, as well as the standard deviation of the percentage changes for each currency. Use the table to select the percent change from March 1 to April 1 in the Canadian dollar exchange rate and the euro exchange rate. Value of the Canadian Dollar Month January 1 February 1 March 1 April 1 May 1 June 1 July 1 Standard Deviation (US Dollars per Canadian Dollar) $0.62 0.63 0.64 0.66 0.67 0.65 0.66 In this example, the value of the Monthly Percent Change in Canadian Dollar Value 1.61% 1.59% 1.52% -2.99% 1.54% 2.08% The percentage change in the Canadian dollar from March 1 to April 1 represents Value of Euro (US Dollars per euro) $1.14 1.16 1.18 1.15 1.13 1.15 1.16 a depreciation no change an appreciation was more volatile over the entire time period. Monthly Percent Change in Euro Value 1.75% 1.72% -1.74% 1.77% 0.87% 1.94% in the value of the Canadian dollar.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Suppose you observe the following quotes between the euro and the Mexican peso (Mex$): 1/1/14: Mex$20/€ 1/1/15: €.08/Mex$ Find the percentage change in the value of the euro from the Mexican point of view. Round intermediate steps and your final answer to four decimals. .375 -60 -375 .60 none of the above
The following table shows PPP exchange rates (the price of 1 U.S. dollar in units of the foreign currency) for several countries, determined based on the Big Mac Index. PPP exchange rate (1USS=) United States (US$) Argentina (Peso) Australia (A$) Brazil (Real) Britain (£) Canada (C$) Chile (Peso) China (Yuan) В.75 1.17 2.33 0.61 1.12 469 3.54 a. According to this data, what are the predicted exchange rates between the following countries? i. Argentina and Australia ii. Brazil and Canada iii. Chile and China iv. China and Canada b. Suppose that a Canadian dollar buys more silver in Australia than it buys in Mexico. What does purchasing-power parity imply should happen?
Chapter 18, Question 4. Attached is a similar question with answers. Please answer in similar format
Required: Suppose you conduct currency carry trade by borrowing $1 million at the start of each year and investing in the New Zealand dollar for one year. One-year interest rates and the exchange rate between the U.S. dollar ($) and New Zealand dollar (NZ$) are provided below for the period 2000 - 2009. Note that interest rates are one-year interbank rates on January 1st each year, and that the exchange rate is the amount of New Zealand dollar per U.S. dollar on December 31 each year. The exchange rate was NZ$1.9108 per $ on January 1, 2000. Fill out columns (4) - (7) and compute the total dollar profits from this carry trade over the ten-year period. Also, assess the validity of uncovered interest rate parity based on your solution of this problem. You are encouraged to use the Excel spreadsheet software to tackle this problem. Note: Negative value should be entered with a minus sign. Enter profit value answers in dollars, rather than in millions of dollars. Do not round intermediate…
Suppose you observe the following spot and forward exchange rates between the U.S. dollar ($) and the Canadian dollar (C$): Spot Exchange Rate One-Year Forward Exchange Rate Canadian dollar (U.S. dollar/Canadian dollar) 0.8842 0.9001 The current one-year interest rate on U.S. Treasury securities is 6.89%. If interest rate parity holds, what is the expected yield on one-year Canadian securities of equal risk? 4.75% 4.00% 5.00% 5.75%
Use the information below to answer the following questions. Currency per U.S. $ 1.2380 1.2353 Australia dollar 6-months forward Japan Yen 6-months forward U.K. Pound 6-months forward 100.3600 100.0200 .6789 .6784 Suppose interest rate parity holds, and the current six month risk-free rate in the United States is 5 percent. Use the approximate interest rate parity equation to answer the following questions. a. What must the six-month risk-free rate be in Australia? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What must the six-month risk-free rate be in Japan? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Australian risk-free rate b. Japanese risk-free rate c. Great Britain risk-free rate c. What must the six-month risk-free rate be in Great Britain? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) % % %
Assume the following information: Spot rate of U.S. dollar Quoted Price AUD1.2500/USD 180-day forward rate of U.S. dollar 180-day Australian interest rate (a periodic rate) 180-day U.S. interest rate (a periodic rate) AUD1.2800/USD 4.75% 3.10% A. What USD-denominated percent rate of return can a US investor earn if they attempt covered interest arbitrage? (to two decimal places like 6.54%) B. What AUD-denominated percent rate of return can an Australian investor earn if they attempt covered interest arbitrage? (to two decimal places like 6.54%) C. Given this information, who has a covered interest arbitrage opportunity? Answer either "Australian investors" or "U.S. investors". D. What changes in the 2 quoted prices above would likely occur to eliminate any further possibilities of covered interest arbitrage? (answer with just or 1) Spot rate of U.S. dollar 180-day forward rate of U.S. dollar
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You are given the following quotes: U.S. dollar/Mexican Peso = 0.2501 U.S. dollar/Australian Dollar = 0.7448 U.S dollar/Chinese Yuan = 0.1352 What is the Chinese Yuan/Australian Dollar cross rate?
Assume that the indirect quote is for 115 Japanese yen per U.S.dollar and that the direct quote is for 1.25 U.S. dollars per euro.What is the yen per euro exchange rate? (143.75 yen per euro)
Forward premiums/discounts. Referring to the forward quotes in the Wall Street Journal (Exhibit 5.5) for the Japanese yen, determine whether the yen is at a premium or discount against the U.S. dollar. What is the percentage premium/discount for maturities of one, three, and six months? Included images for reference
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