Problem 1 (5 points) - Calculate the cross rate between the Costa Rican colon (C) and the Canadian dollar (C$) from the following spot rates: C503.29/$ and C$1.02/$
Problem 2 (10 points) - You are planning a 30-day vacation in Bali, Indonesia one year from now. The present charge for a hotel room in Indonesian Rupiah (IDR) is 800,000 IDR/day. The Indonesian Rupiah (IDR) currently trades at IDR16,000/$. You determine that the dollar cost today for a 30-day stay would be $1500. The hotel informs you that any increase in its room charges will be limited to any increase in the Indonesian cost of living. Indonesian inflation is expected to be 2.75% per annum, while U.S. inflation is expected to be 1.25%
a. How many dollars might you expect to need one year hence to pay for your 30-day vacation?
b. By what percent will the dollar cost have gone up?
Problem 1) Cross rate between Costa Rican colon (C) and Canadian dollar (C$) = 503.29/1.02 = C493.422/C$
Problem 2)
a)Calculation of Dollars needed 1 year from today-
| Spot rate of year 1= | spot rate of year 0*(1+rIDR)/(1+r$) | |
| Where, | ||
| r= rate of inflation | ||
| Spot rate of year 1= | 16000*(1+0.0275)/(1+0.125) | 14613.33333 |
| Dollars needed= | (30days *(800000IDR/day))/14613.33IDR/$ |
1642.336141 IDR/$ |
b) Dollar cost has gone up by (1642.336-1500)/1500= 9.49%
Problem 1 (5 points) - Calculate the cross rate between the Costa Rican colon (C) and...
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