1、1INTERNATIONAL FINANCEAssignment Problems (3) Name: Student#: I. Choose the correct answer for the following questions (only ONE correct answer) (2 credits for each question, total credits 2 x 25 = 50)1. Interbank quotations that include the United States dollars are conventionally given in _, which
2、 state the foreign currency price of one U.S. dollar, such as a bid price of SFr 0.85/$.A. indirect quoteB. direct quoteC. American quoteD. European quote2. The spot exchange rate published in financial newspapers is usually the _.A. nominal exchange rateB. real exchange rateC. effective exchange ra
3、teD. equilibrium exchange rate3. The foreign exchange refers to the _.A. foreign bank notes and coinsB. demand deposits in foreign banksC. foreign securities that can be easily cashedD. all of the above4. The functions of the foreign exchange market come down to _.A. converting the currency of one c
4、ountry into the currency of anotherB. providing some insurance against the foreign exchange riskC. making the foreign exchange speculation easyD. Only A and B are true.5. Which of the following is NOT true regarding the foreign exchange market?A. It is the place through which people exchange one cur
5、rency for another.B. The exchange rate nowadays is mainly determined by the market forces.C. Most foreign exchange transactions are physically completed in this market.D. All of the above are true.6. The world largest foreign exchange markets are _ respectively.A. London, New York and TokyoB. London
6、, Paris and FrankfurtC. London, Hong Kong and SingaporeD. London, Zurich and Bahrain27. The foreign exchange market is NOT efficient because _.A. monetary authorities dominate the foreign exchange market and everybody knows that by definition, central banks are inefficientB. commercial banks and oth
7、er participants of the market do not compete with one another due to the fact that transaction takes place around the world and not in a single centralized locationC. foreign exchange dealers have different prices such as bid and ask pricesD. None of the reasons listed are correct because the foreig
8、n exchange market is an efficient market8. _ earn a profit by a bid-ask spread on currencies they buy and sell. _ on the other hand, earn a profit by bringing together buyers and sellers of foreign exchanges and earning a commission on each sale and purchase.A. Foreign exchange brokers; foreign exch
9、ange dealersB. Foreign exchange dealers; foreign exchange brokersC. arbitragers; speculatorsD. commercial banks; central banks9. Most foreign exchange transactions are through the U.S. dollars. If the transaction is expressed as the currencies per dollar, this is known as _ whereas _ are expressed a
10、s dollars per currency.A. direct quote; indirect quoteB. indirect quote; direct quoteC. European quote; American quoteD. American quote, European quote10. From the viewpoint of a Japanese investor, which of the following would be a direct quote?A. SFr 1.25/ B. $1.55/C. 110/D. 0.0091/ 11. Which of th
11、e following is true about the foreign exchange market?A. It is a global network of banks, brokers, and foreign exchange dealers connected by electronic communications system.B. The foreign exchange market is usually located in a particular place.C. The foreign exchange rates are usually determined b
12、y the related monetary authorities.D. The main participants in this market are currency speculators from different countries.12. The extent to which the income from individual transactions is affected by fluctuations in foreign exchange values is considered to be _.3A. Translation exposureB. economi
13、c exposureC. transaction exposureD. accounting exposure13. Which of the following exchange rates is adjusted for price changes?A. nominal exchange rateB. real exchange rateC. effective exchange rate D. equilibrium exchange rate14. Suppose the exchange rate of the RMB versus U.S. dollar is 6.8523/$ n
14、ow. If the RMB were to undergo a 10% depreciation, the new exchange rate in terms of /$ would be:A. 6.1671 B. 7.5375 C. 6.9238 D. 7.613515. At least in a U.S. MNCs financial accounting statement, if the value of the euro depreciates rapidly against that of the dollar over a year, this would reduce t
15、he dollar value of the euro profit made by the European subsidiary. This is a typical _.A. transaction exposureB. translation exposureC. economic exposureD. operating exposure16. A Japanese-based firm expects to receive pound-payment in 6 months. The company has a (an) _.A. economic exposureB. accou
16、nting exposureC. long position in sterlingD. short position in sterling17 The exposure to foreign exchange risk known as Translation Exposure may be defined as _.A. change in reported owners equity in consolidated financial statements caused by a change in exchange ratesB. the impact of settling out
17、standing obligations entered into before change in exchange rates but to be settled after change in exchange ratesC. the change in expected future cash flows arising from an unexpected change in exchange ratesD. All of the above18 When a firm deals with foreign trade or investment, it usually has fo
18、reign exchange risk exposure. So if an American firm expects to receive a dollar-payment 4from a Chinese company in the next 30 days, the U.S. firm has the possible _.A. economic exposureB. transaction exposureC. translation exposureD. none of the above19. In order to avoid the possible loss because
19、 of the exchange rate fluctuations, a firm that has a _ position in foreign exchanges can _ that position in the forward market.A. short; sellB. long; sellC. long; buyD. none of the above20. A forward contract to deliver Japanese yens for Swiss francs could be described either as _ or _,A. selling y
20、ens forward; buying francs forwardB. buying francs forward; buying yens forwardC. selling yens forward; selling francs forwardD. selling francs forward; buying yens forward21. Dollars are trading at S0SFr/$=SFr0.7465/$ in the spot market. The 90-day forward rate is F1SFr/$=SFr0.7432/$. So the forwar
21、d _ on the dollar in basis points is _:A. discount, 0.0033B. discount, 33C. premium, 0.0033D. premium, 3322. If the spot rate is $1.35/, 3-month forward rate is $1.36/, which of the following is NOT true?A. euro is at forward premium by 100 points.B. dollar is at forward discount by 100 points.C. do
22、llar is at forward discount by 55 points.D. euro is at forward premium by 2.96% p.a.23. If the spot C$/$ rate is 1.0305/15, forward dollar is 25/30 premium, the outright forward quote in American term should be _.A. 1.0330 1.0345B. 1.0280 1.0285C. 0.9681 0.9667D. 0.9728 0.9723524. If the spot C$/$ r
23、ate is 1.0305/15, forward dollar is 25/30 premium, the $/C$ forward quote in terms of points should be _.A. 30/25B. 25/30C. (23/28)D. (28/23)25. The current U.S. dollar exchange rate is 85/$. If the 90-day forward dollar rate is 90/$, then the yen is selling at a per annum _ of _.A. premium; 5.88%B.
24、 discount; 5.56%C. premium; 23.52%D. discount; 22.23%II. ProblemsQuestions 1 through 10 are based on the information presented in Table 3.1. (2 credits for each question, total credits 2 x 10 = 20)Table 3.1Country Exchange rate Exchange rate CPI Volume of Volume of(2008) (2009) (2008) exports to U.S
25、 imports from U.S.Germany 0.75/$ 0.70/$ 102.5 $200m $350mMexico Mex$11.8/$ Mex$12.20/$ 110.5 $120m $240mU.S. 105.31. The real exchange rate of the dollar against the euro in 2009 was _.2. The real exchange rate of the dollar against the peso in 2009 was _.3. The dollar was _ against the euro in nomi
26、nal term by _.A. appreciated; 6.67%B. depreciated; 6.67%C. appreciated; 7.14%D depreciated; 7.14%4. The Mexican peso was _ against the dollar in nominal term by _.A. appreciated; 3.39%B. depreciated; 3.39%C. appreciated; 3.28%D. depreciated; 3.28%5. The volume of the German foreign trade with the U.
27、S. was _.66. The volume of the Mexican foreign trade with the U.S. was _.7. Assume the U.S. trades only with the Germany and Mexico. Now if we want to calculate the dollar effective exchange rate in 2009 against a basket of currencies of euro and Mexican peso, the weight assigned to the euro should
28、be _.8. The weight assigned to the peso should be _.9. Assume the 2008 is the base year. The dollar effective exchange rate in 2009 was _.10. Was the dollar generally stronger or weaker in 2009 according to your calculation?11. The following exchange rates are available to you.Fuji Bank 80.00/$Unite
29、d Bank of Switzerland SFr0.8900/$Deutsche Bank 95.00/SFrAssume you have an initial SFr10 million. Can you make a profit via triangular arbitrage? If so, show steps and calculate the amount of profit in Swiss francs. (8 credits)12. If the dollar appreciates 1000% against the ruble, by what percentage
30、 does the ruble depreciate against the dollar? (5 credits)13. As a percentage of an arbitrary starting amount, about how large would transactions costs have to be to make arbitrage between the exchange rates SSFr/$ = SFr1.7223/$, S$/￥ = $0.009711/, and S￥/SFr = 61.740/SFr unprofitable? Explain. (7 7
31、credits14. You are given the following exchange rates:S￥/A$ = 67.05 68.75S/A$ = 0.3590 0.3670Calculate the bid and ask rate of S￥/ : (5 credits)15. Suppose the spot quotation on the Swiss franc (CHF) in New York is USD0.9442 52 and the spot quotation on the Euro (EUR) is USD1.3460 68. Compute the pe
32、rcentage bid-ask spreads on the CHF/EUR quote. ( 5 credits)Answers to Assignment Problems (3)Part I1. D 2. A 3. D 4. D 5. D6. A 7. D 8. B 9. C 10. C11. A 12. A 13. B 14. D 15. B16. C 17. A 18. D 19. B 20. A21. B 22. B 23. C 24. C 25. DPart II1. 0.70 x (105.3/102.5) = 0.7 x 1.0273 = 0.71912. 12.2 x (
33、105.3/110.5) = 12.2 x .9529 = 11.6259 3. B (0.7 /.75) 1 = -6.67% 4. D (1/12.2)/(1/11.8) 1 = -3.28%5. 550 6. 360 7. 550/910 = 60.44% 8. 360/910 = 39.569. (0.70/0.75)(60.44%) + (12.2/11.8)(39.56%) = .5641 + 0.4090 = .9731 = 97.31% 810. weaker, because dollar depreciated by 2.69%.11. Since S￥/$ S$/SFr
34、SSFr/￥ = 80 x 1/0.8900 x 1/95.00 = 0.946186 1, there is an arbitrage opportunity.Steps: Buy from Deutsche Bank, SFr10 million x 95.00 = 950 million Buy $ from Fuji Bank, $950 m / 80.00 = $11.875 m Buy SFr from UBS, $11.875 x 0.8900 = SFr10.56875 mProfit (ignoring transaction fees):SFr10.56875 SFr10
35、= 0.56875 million = 568,75012. (x 1) = 1000%; 1/11 1 = 90.9%13. SSFr/$ S$/￥ S￥/SFr = SFr1.7223/$ x $0.009711/ x 61.740/SFr = 1.0326If transaction costs exceed $0.0326 (3.26%), the arbitrage is unprofitable.14. Given: S￥/A$ = 67.05 68.75S/A$ = 0.3590 0.3670So, S￥/ = 67.05/0.3670 = 182.70 (bid)S/ = 68.75/0.3590 = 191.50 (ask)15. Given: USD0.9442 52/SFrUSD1.3460 68/SFrSo, SSRr/ = 1.3460/0.9452 =1.424 (bid)SSFr/ = 1.3468/0.9442 = 1.4264 (ask)Bid-ask margin = (1.4264 1.424) / 1.4264 = 0.1683%
