Exercise 2.12. At the close of business on 20 November 2020, the exchange rate for Australian dollars against the British pound is 1.7148 (GBP is the domestic currency). This means that you get A$1.7148 for £1. The Bank of England rate is 0.5% and the Reserve Bank of Australia rate is 2.5%. Find the 3-months forward price of a Australian dollar (in GBP).

Exercise 2.12. At the close of business on 20 November 2020, the exchange rate for Australian dollars against the British pound is 1.7148 (GBP is the domestic currency). This means that you get A$1.7148 for £1. The Bank of England rate is 0.5% and the Reserve Bank of Australia rate is 2.5%. Find the 3-months forward price of a Australian dollar (in GBP).

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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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
Assume that the export price of a Toyota Camry from Osaka, Japan is ¥3,567,020. The exchange rate is ¥138 $1.00. The forecast rate of inflation in the United States is 4.0% per year, and in Japan it is 0.0% per year. Assuming 70% exchange rate pass-through, what will be the dollar price of a Camry at the end of the year? $27.320 $27,045 O $26,571 O $36,094
On January 31, 2020 Fred has a 50,000 foreign currency denominated Accounts Payable due in 1 month. This payable is not hedged. The following exchange rates were in effect. January 31, 2020 : spot rate 5 US = 1 FC January 31, 2020: one month forward rate 2.5 US = 1FC February 28, 2020 spot rate 4 US = 1 FC February 28, 2020 one month forward rate 3 US = 1FC How much is the FX gain or loss on February 28, 2020. a. FX gain $10,000 b. FX gain $50,000 c. FX loss $2,500 d. FX loss $50,000 e. FX gain $2,500
2- Assume that the export price of a Toyota Corolla from Osaka, Japan is ¥4,200,000. The exchange rate is ¥109.60/$. The forecast rate of inflation in the United States is 2.5% per year and is 1.5% per year in Japan. Use this data to answer the following questions on exchange rate pass- through. a. What was the export price for the Corolla at the beginning of the year expressed in the U.S. Dollars? b. Assuming purchasing power parity holds, what should the exchange rate be at the end of the year? c. Assuming a 65% pass-through of the exchange rate, what will be the dollar price of a Corolla at the end of the year?
On December 20, 2020, Momeier Company (a U.S.-based company) sold parts to a foreign customer at a price of 45,000 rials. Payment is received on January 10, 2021. Currency exchange rates are as follows: Date U.S. Dollar per Rial December 20, 2020 $ 1.14 December 31, 2020 1.11 January 10, 2021 1.07 How does the fluctuation in the U.S. dollar per rial exchange rate affect Momeier’s 2020 income statement? How does the fluctuation in the U.S. dollar per rial exchange rate affect Momeier’s 2021 income statement?
H3
The nominal exchange rate between the Australian Dollar and the Euro in equilibrium is 0.5(1 AUD buys 0.5 Euros) and both countries' interest rates are currently at 2% per annum. The interest rate in Australia is raised to 4% per annum for 2 years, after which it returns to 2% per annum. calculate the exchange rate at the time when the interest rate is raised? Use a graph to show the exchange rate over time.
18. The six-month forward rate between the British pound and the U.S. dollar is $1.5 per pound. If six month interest rates are 4% in the United States and 200 basis points higher in England, what is the current exchange rate?
Answer in typing
Ganado Europe (A). Using facts in the chapter for Ganado Europe, assume the exchange rate on January 2, 2020, in Exhibit 11.5 dropped in value from $1.2000 = €1.00 to $0.9000 = €1.00 (rather than to $1.0000 = €1.00). Recalculate Ganado Europe’s translated balance sheet for January 2, 2020, with the new exchange rate using the current rate method. What is the amount of translation gain or loss? Where should the translation gain or loss appear in the financial statements?
On December 20, 2020, Momeier Company (a U.S.-based company) sold parts to a foreign customer at a price of 175,000 rials. Payment is received on January 10, 2021. Currency exchange rates are as follows: Date U.S. Dollar per Rial December 20, 2020 $ 1.27 December 31, 2020 1.24 January 10, 2021 1.20 How does the fluctuation in the U.S. dollar per rial exchange rate affect Momeier’s 2020 income statement?
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