国际金融课后习题答案.doc
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1、You are given the following information about a countrys international transactions during a year:a.Calculate the values of the countrys goods and services balance,current account balance,and official settlements balance?a.Merchandise trade balance: $330 - 198 = $132 Goods and services balance: $330
2、 - 198 + 196 - 204 = $124 Current account balance: $330 - 198 + 196 - 204 + 3 - 8 = $119Official settlements balance: $330 - 198 + 196 - 204 + 3 - 8 + 102 - 202 + 4 = $23b.What are the value of the change in official reserve assets(net)?Is the country increasing or decreasing its net holdings of off
3、icial reserve assets?b.Change in official reserve assets (net) = - official settlements balance = -$23The country is increasing its net holdings of official reserve assets.What are the major types of transactions or activities that result in supply of foreign currency in the spct foreign exchange ma
4、rket?Exports of merchandise and services result in supply of foreign currency in the foreign exchange market. Domestic sellers often want to be paid using domestic currency, while the foreign buyers want to pay in their currency. In the process of paying for these exports, foreign currency is exchan
5、ged for domestic currency, creating supply of foreign currency. International capital inflows result in a supply of foreign currency in the foreign exchange market. In making investments in domestic financial assets, foreign investors often start with foreign currency and must exchange it for domest
6、ic currency before they can buy the domestic assets. The exchange creates a supply of foreign currency. Sales of foreign financial assets that the countrys residents had previously acquired, and borrowing from foreigners by this countrys residents are other forms of capital inflow that can create su
7、pply of foreign currency. You have access to the following three spot exchange rates:0.01/YEN0.20/KRONE25YEN/KRONEYou strat with dollars and want to end up with dollarsa.hoe would you engage in arbitrage to profit from these three rates?what is the profit for each dollar used initially?a.The cross r
8、ate between the yen and the krone is too high (the yen value of the krone is too high) relative to the dollar-foreign currency exchange rates. Thus, in a profitable triangular arbitrage, you want to sell kroner at the high cross rate. The arbitrage will be: Use dollars to buy kroner at $0.20/krone,
9、use these kroner to buy yen at 25 yen/krone, and use the yen to buy dollars at $0.01/yen. For each dollar that you sell initially, you can obtain 5 kroner, these 5 kroner can obtain 125 yen, and the 125 yen can obtain $1.25. The arbitrage profit for each dollar is therefore 25 cents.b.As a result of
10、 this arbitrage,what is the pressure on the cross-rate between yen and krone?what must the value of the cross-rate be to eliminate the opportunity for triangular arbitrage?b.Selling kroner to buy yen puts downward pressure on the cross rate (the yen price of krone). The value of the cross rate must
11、fall to 20 (=0.20/0.01) yen/krone to eliminate the opportunity for triangular arbitrage, assuming that the dollar exchange rates are unchanged.Explain the nature of the exchange rate risk for each of the following,from the perspective of the U.S frim or person.in your answer,include whether each is
12、a long or short position in foreign currency.a.a small U.S firm sold experimental computer computer compoments to a Japanese firm,and it will receive payment of 1 million yen in 60 days.a.The U.S. firm has an asset position in yenit has a long position in yen. To hedge its exposure to exchange rate
13、risk, the firm should enter into a forward exchange contract now in which the firm commits to sell yen and receive dollars at the current forward rate. The contract amounts are to sell 1 million yen and receive $9,000, both in 60 days.The current spot exchange rate is 1.20/euro.the current 90-day fo
14、rward exchange rate is1.18/euro.you expect the spot rate to be 1.22/euro in 90 days.how would you speculate using a forward contract?if many people speculate in this way,what pressure is placed on the walue of the current forward exchange rate?Relative to your expected spot value of the euro in 90 d
15、ays ($1.22/euro), the current forward rate of the euro ($1.18/euro) is lowthe forward value of the euro is relatively low. Using the principle of buy low, sell high, you can speculate by entering into a forward contract now to buy euros at $1.18/euro. If you are correct in your expectation, then in
16、90 days you will be able to immediately resell those euros for $1.22/euro, pocketing a profit of $0.04 for each euro that you bought forward. If many people speculate in this way, then massive purchases now of euros forward (increasing the demand for euros forward) will tend to drive up the forward
17、value of the euro, toward a current forward rate of $1.22/euro.The following rates are available in the markets:Current spot exchange rate: 0.500/SFrCurrent 30-day forward exchange rate: 0.505/SFrAnnualized interest rate on 30-day dollar-denominated bonds:12%(1.0% for 30 days)Annualized interest rat
18、e on 30-day Swiss franc-denominated bonds:6%(0.5% for 30 days)a.Is the swiss franc at a forward premium or discount?a.The Swiss franc is at a forward premium. Its current forward value ($0.505/SFr) is greater than its current spot value ($0.500/SFr).b.should a U.S-based investor make a covered inves
19、tment in swiss franc-denominated 30-day bonds,rather than investing 30-day dollar-denominated bonds?Explain.b.The covered interest differential in favor of Switzerland is (1 + 0.005)(0.505) / 0.500) - (1 + 0.01) = 0.005. (Note that the interest rate used must match the time period of the investment.
20、) There is a covered interest differential of 0.5% for 30 days (6 percent at an annual rate). The U.S. investor can make a higher return, covered against exchange rate risk, by investing in SFr-denominated bonds, so presumably the investor should make this covered investment. Although the interest r
21、ate on SFr-denominated bonds is lower than the interest rate on dollar-denominated bonds, the forward premium on the franc is larger than this difference, so that the covered investment is a good idea.c.Because of covered interest arbitrage,what pressures are placed on the various rates?if the only
22、rate that actually changes is forward exchange rate,to what value will it bu driven?c.The lack of demand for dollar-denominated bonds (or the supply of these bonds as investors sell them in order to shift into SFr-denominated bonds) puts downward pressure on the prices of U.S. bondsupward pressure o
23、n U.S. interest rates. The extra demand for the franc in the spot exchange market (as investors buy SFr in order to buy SFr-denominated bonds) puts upward pressure on the spot exchange rate. The extra demand for SFr-denominated bonds puts upward pressure on the prices of Swiss bondsdownward pressure
24、 on Swiss interest rates. The extra supply of francs in theforward market (as U.S. investors cover their SFr investments back into dollars) puts downward pressure on the forward exchange rate. If the only rate that changes is the forward exchange rate, this rate must fall to about $0.5025/SFr. With
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