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Answer the question using October 1999 table: How many EUR can you buy for 1USD and other way round? Calculate the annual percentage of discount or premium on the YEN. According to the expectations theory, what is the expected spot rate for the YEN in 1year time?

Answer the question using October 1999 table: How many EUR can you buy for 1USD and other way round? Calculate the annual percentage of discount or premium on the YEN. According to the expectations theory, what is the expected spot rate for the YEN in 1year time?

Essentials Of Investments
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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Answer the question using October 1999 table:

  • How many EUR can you buy for 1USD and other way round?
  • Calculate the annual percentage of discount or premium on the YEN.
  • According to the expectations theory, what is the expected spot rate for the YEN in 1year time?
  • According to PPP, what is the expected difference in inflation rates between US and Japan?    
October 7, 1999 USD exchange rates Spot rate 3 M Forward 1Y forward Europe EMU (EUR) 1.0707 1.0785 1.0979 Greece (drahma) 306.675 307.75 314.125 Sweden (korona) 8.1400 8.0875 7.988 Switzerland (franc CHF) 1.4865 1.471 1.4331 U.K.(GBP) 1.6566 1.6573 1.6535 Americas Canada (CAD) 1.4703 1.4662 1.4594 Mexico (peso MXN) 9.4380 9.853 11.153 Asia / Pacific Australia (AUD) 1.5148 1.5139 1.5133 Hong Kong (HDK) 7.7681 7.7678 7.896 Indonesia (rupia IDR) 7800 7952.5 8487.5 Japan (YEN) 107.502 105.865 101.3 Singapore (dolar SGD) 1.6790 1.665 1.6358
Transcribed Image Text:October 7, 1999 USD exchange rates Spot rate 3 M Forward 1Y forward Europe EMU (EUR) 1.0707 1.0785 1.0979 Greece (drahma) 306.675 307.75 314.125 Sweden (korona) 8.1400 8.0875 7.988 Switzerland (franc CHF) 1.4865 1.471 1.4331 U.K.(GBP) 1.6566 1.6573 1.6535 Americas Canada (CAD) 1.4703 1.4662 1.4594 Mexico (peso MXN) 9.4380 9.853 11.153 Asia / Pacific Australia (AUD) 1.5148 1.5139 1.5133 Hong Kong (HDK) 7.7681 7.7678 7.896 Indonesia (rupia IDR) 7800 7952.5 8487.5 Japan (YEN) 107.502 105.865 101.3 Singapore (dolar SGD) 1.6790 1.665 1.6358
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