Question

Use the following table to complete assignment

TABLE 9.1 Exchange Rates of Major Currencies Currency per U.S. S U.S. $ Currency per U.S. S U.S. Country/Currency Equivalent Country/Currency Equivalent Mexico (peso) 10.3029 Argentina (peso) 0.3319 3.0130 0.0971 Australian (dollar) New Zealand (dollar) 0.9556 1.0465 0.7577 1.3198 Norway (krone) Bahrain (dinar) 2.6525 0.3770 0.1955 5.1151 1.6100 Pakistan (rupee) 0.01403 71.276 Brazil (real) 0.6211 Peru (new sol) 0.9893 2.8043 Canada (dolar) 10108 0.3566 1-mos forward Philippines (peso) 0.9888 1,0113 0.0220 45.475 Poland (zloty) 2.0816 3-mos forward 0.9882 1.0119 0.4804 Romania (leu) 1.0129 0.4442 2.2511 6-mos forward 0.9873 Chile (peso) 502.77 Russia (ruble) 0.04267 23.436 0.001989 China (yuan) Saudi Arabia (riyal) 3.7509 0.1458 6.8599 0.2666 Colombia (peso) 0.7360 0.0005782 1729.5 Singapore (dollar) 1.3587 0.05196 Slovak Rep (koruna) Czech Rep. (koruna) 0.06724 14.872 19.246 South Africa (rand) Denmark (krone) 4.7416 0.129 7.7459 0.2109 South Korea (won) 999.20 Ecuador U.S. (dollar) 1 0.0010008 0.1870 5.3476 Sweden (krona) 0.1664 6.0096 Eqypt (pound) 0.6354 Switzerland (franc) 0.9719 1,0289 Euro area (euro) 5737 Hong Kong (dollar) 0.1282 7,8021 1-mos forward 0,9722 10286 Hungary (forint) 0.006794 147.19 3-mos forward 0.9727 10281 India (rupee) 43.0108 6-mos forward 0.9735 1.0272 0.02325 Indonesia (rupiah) Taiwan (dollar) 0.03290 30.395 0,0001090 9174 Thailand (baht) 33.613 Israel (shekel) 0.3109 3.2165 0.02975 0.009362 106.81 Turkey (lira) 0.8166 1.2245 Japan (yen) U.A.E. (dirham) 0.009379 106.62 0.2723 3.6724 1-mos forward U.K. (pound) 0.009412 1.9815 0.5047 3-mos forward 106.25 1-mos forward 1.9769 0.5058 6-mos forward 0.009465 105.65 0.5083 1.4139 0.7073 3-mos forward 1.9675 Jordan (dinar) 0.01505 66.450 6-mos forward 19547 0.5116 Kenya (shilling) 0.2652 Uruguay (peso) 0.05190 19.27 Kuwait (dinar) 3.7702 Lebanon (pound) 0.0006634 Venezuela (b. fuerte) 0.46628742 2.1446 1507.39 Vietnam (dong) 16850 Malaysia (ringgit) 0.3082 3.2446 0.00006 oww.auesoaseNTTOOE

Suppose that on March 1 of the current year, the peso-US$ exchange rate was P5/$. On March 31 of the current year, the exchange rate stood at P8/$. Calculate the 1-month percent change in the value of the Mexican peso (= P).

Calculate the spot Korean won-Japanese yen exchange rate in W/¥. (Korean won = W; Japanese yen = ¥)

Calculate the spot Taiwanese dollar-euro exchange rate in T$/€. (Taiwanese dollar = T$; euro = €)

Mr. Smith buys 1 share of Canada-based CC Forest Corp. at C$20 (C$ = Canadian currency) when the FX rate is C$1/$. One year later, the price is C$24 and no dividends have been paid. If the current exchange rate is C$1.2/$, calculate the 1-year investment return in U.S. dollars.

Suppose that in the beginning of the year, $1 buys 80 yen (= ¥). The expected annual inflation rates are 6% in Japan and 3% in the U.S., respectively. Calculate the yen-dollar (= ¥/$) exchange rate at the end of the year.

Caterpillar (CAT) of the U.S. just sold an A$1 million crane to Rio Tinto of Australia (currency = A$). Under the terms of the contract, the American company will receive A$1 million in 30 days. Advise Caterpillar on its strategies in dealing with this cash flow. For each strategy, explain how it works and the outcome.

Referring to the same table (Assignment 5 Table), calculate the 1-month Swiss francUK pound forward rate in SF/L and in L/SF. (Swiss franc = SF; pound = L)

Answer 1

1) Mexican peso was P5/$ on March 1 and it is now P8/$ on March 31.

( 8 - 5 ) / 5 = 3 / 5
= 0.6

The change is 60%

2) USD equivalent South Korea Won = 0.0010008
Japanese Yen per USD = 106.81

Won / Yen = 0.0010008 * 106.81
Won / Yen = 0.1069

3) Taiwan dollar / USD = 30.395
USD / Euro = 1.5737

T$ / Euro = 30.395 * 1.5737
T$ / Euro = 47.8326

4) Mr. Smith bought shares of a Canadian company at C$20 and at that time the exchange rate was C$1/$.
Now the stock has rose to C$24 which means it has appreciated by 20%

( 24 - 20 ) / 20 = 0.2 or 20%

On the other hand, the exchange rate also rose to C$1.2/$ which means the currency has depreciated by 20%.
Mr Smith will convert C$ to USD at the new exchange rate and that he will receive $20.

C$24 / 1.2 = $20

The return on investment is zero over the year.

First 4 questions have been answered according to the HOMEWORKLIB RULES.