Exercise 11-1 (Static) Exchange Rates LO 11-1Suppose the direct foreign exchange rates in U.S. dollars are1 British pound =1 Canadian dollar =Required:a. What are the indirect exchange rates for the British pound and the Canadian dollar?b. How many pounds must a British company pay to purchase goods costing $8,000 from a U.S. company?c. How many U.S. dollars must be paid for a purchase costing 4,000 Canadian dollars?Required A$ 1.60$ 0.74Complete this question by entering your answers in the tabs below.Required BRequired CWhat are the indirect exchange rates for the British pound and the Canadian dollar?Note: Round your answers to 4 decimal places.1 USD1 USDAnswer is complete but not entirely correct.€ 0.6250 British pounds$ 1.3510Canadian dollars< Required ARequired B >

Direct quotation is when the one unit of foreign currency is expressed in terms of domestic…

Answered: Exercise 11-1 (Static) Exchange Rates…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Pound Ca Megs MlensP Seved Use the information below to answer the following questions. U.S. $ EQUIVALENT CURRENCY PER U.S. %24 3.3466 .8088 13.2992 .9720 482.80 Polish Zloty 2988 1.2364 .0752 Euro Mexican Peso Swiss Franc Chilean Peso New Zealand Dollar Singapore Dollar 1.0288 .002071 8084 1.2370 .8008 1.2488 a. If you have $260, how many Polish zloty can you get? (Do not include the Polish zloty sign (Z). Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. How much is one euro worth in U.S. dollars? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) c. If you have 4.70 million euros, how many dollars do you have? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 1,234,567.) d. Which is worth more, a New Zealand dollar or a Singapore dollar? e. Which is worth more, a Mexican peso or a Chilean peso? f-1. How many Swiss francs can you get for a…
Table 4.2 Currency Cross Rates (2:00 p.m. ET, Per CS Canadian dollar (C$) U.S. dollar (US$) Euro (€) Japanese yen (x) British pound (£) Swiss franc (Sufr) Australian dollar (AS) January 11, 2019) Per US$ Per C 1.52586 1.32329 New exchange rate New exchange rate 0.75569 0.65537 0.86725 81.71270 108.11980 124.67273 0.59198 0.73894 1.05216 Per Y 0.012238 1.15307 0.009249 0.008021 per cs Per Sw fr 1.35328 1.02267 0.71823 0.88697 0.62292 138.12155 110.61947 77.63975 0.801221 0.56273 0.70245 0.78337 0.90318 0.00724 0.97783 1.12744 0.00904 1.24809 1.39232 1.60535 0.01288 1.77704 1.42359 Jper c Per £ 1.68925 1.27654 1.10720 If the CS weakens by 1.6% relative to the € in Table 4.2, what will be the new values for € per C$100 and C$ per €1.00? (Do not round your intermediate calculations. Round your answers to 5 decimal places.) Per AS 0.95043
A1 2b Your Canadian company processes raw sugar for sale in the United States, and the firm has just received a container of raw material from the UK. You have an invoice that asks you to pay £20,000 in 30 days. The current exchange rate is $1.75/£. Invoice amount = £20,000 Exchange rate 1£ = $ 1.75 Cost of bill today in Canadian $ = Invoice amount*Exchange rate 1£ = 20,000*1.75 = Canadian $ 35,000 If you thought the dollar would trade at $2.0/£ in 30 days, what should you do?
Consider the following returns: Period United States United Kingdom Exchange Rate 1 10% 5% $3 2 15% -5% 2.5 3 -5% 15% 2.5 4 12% 8% 2 5 6% 10% 1.5 6 2.5 Note that the exchange rate is stated as beginning of period dollars for pounds. What is the average return in each market from the point of view of a US investor and of a UK investor?
Problem 19-6 Calculate the contribution to total performance from currency, country, and stock selection for the manager in the example below. All exchange rates are expressed as units of foreign currency that can be purchased with 1 U.S. dollar. (Do not round intermediate calculations. Round your answers to 2 decimal places. Input all amounts as positive values.) Europe Australasia Far East Currency Selection Country Selection Stock Selection EAFE Weight 0.2 0.4 0.4 Return on Equity Index 11% 18 16 % % % E₁/E0 1.2 0.7 1.4 Profit/Loss Manager's Weight 0.32 0.4 0.28 relative to EAFE relative to EAFE relative to EAFE Manager's Return 10% 22 22
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12 Given these two exchange rates, $1=1.32 Australian dollars and $1= €0.56, compute the cross-rate between the Australian dollar and the pound. State this exchange rate in Australian dollars. Multiple Choice A$2.49 A$2.36 A$2.91
Problem 31-5 Cross-Rates and Arbitrage Suppose the Japanese yen exchange rate is ¥75 = $1, and the British pound exchange rate is £1 = $1.60. a. What is the cross-rate in terms of yen per pound? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Suppose the cross-rate is ¥125 = £1. What is the arbitrage profit per dollar used? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.)
Problem 19-4 (Algo) Required: Suppose a U.S. investor wishes to invest in a British firm currently selling for £33 per share. The investor has $66,000 to invest, and the current exchange rate is $2/£. Consider three possible prices per share at £31, £36, and £41 after 1 year. Also, consider three possible exchange rates at $1.60/£, $2/£, and $2.40/£ after 1 year. Calculate the standard deviation of both the pound- and dollar- denominated rates of return if each of the nine outcomes (three possible prices per share in pounds times three possible exchange rates) is equally likely. (Do not round intermediate calculations. Round your percentage answers to 2 decimal places.) X Answer is complete but not entirely correct. Standard deviation of pound-denominated return Standard deviation of dollar-denominated return 12.37 19.68 %
Question 2 You have the opportunity to store your hard-earned money in a French or a Japanese bank account. The Japanese bank account promises an interest rate of 2% a year. If you deposit 1000 Euro in the French bank account, interests will accrue so that you will have 1105 Euros in two years. Today's exchange rate is 1 Euro to 129.60 Yen. a) What should the 1-year forward exchange rate be for you to be indifferent between the two accounts? Make sure you explain what theories justify your calculations b) If the yearly inflation rate for France is 4%, what do you expect the Japanese inflation to be?
Assume that the following exchange rates exist for the U.S. dollar ($), Euros (€) and the British Pound (£). $/€ Citibank Lloyds Bank Mitsubishi Bank $/£ $1.9324 $1.9324 $732,212.21 $500,000 $300,000 $159,223 €/£ €1.9405 €1.9405 $0.2667 $0.2667 If you are an arbitrageur that starts with $1,000,000 you will end up with the arbitrage loss of?
3. Trading in foreign exchange What are spot rates and forward rates? Purple Whale Foodstuffs Inc., a U.S. company, produces and exports industrial machinery overseas. It recently made a sale to a Japanese manufacturing firm for ¥625 million, but the Japanese firm has 60 days before it must make the payment to Purple Whale Foodstuffs Inc. The spot exchange rate is ¥128.75 per dollar, and the 60-day forward rate is ¥133.45 per dollar. Is the yen selling at a premium or at a discount in the forward market relative to the U.S. dollar? The yen is trading at a discount in the forward market. In the forward market, the yen is trading at a premium. If the customer pays Purple Whale Foodstuffs Inc. the ¥625 million today, how much will Purple Whale Foodstuffs Inc. receive in dollars? O $4.85 million $5.34 million $5.09 million O $5.58 million Assuming that the forward market is correct and the spot exchange rate in 60 days will equal the 60-day forward exchange rate today, Purple Whale…

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