EBK FOUNDATIONS OF FINANCE
10th Edition
ISBN: 9780135160473
Author: KEOWN
Publisher: PEARSON CO
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Chapter 16, Problem 3SP
a)
Summary Introduction
To determine: Spot exchange rate of Country J yen to Country U dollar.
b)
Summary Introduction
To determine: Spot exchange rate for Country S franc to Country U dollar.
c)
Summary Introduction
To determine: Spot exchange rate of Country C $ to Country U dollar.
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1. Based on the following information, answer the problems showing procedure for each
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CURRENCY SPOT & FORWARD RATES
TABLE_1
U.S./Can.
$1 U.S. $1 Cdn
Cdn.$
U.S. $
in
in
Country
per unit per unit
Cdn.$= U.S.$=
1.5833
0.6316
SPOT
1 month forward 1.5847
2 months forward 1.5861
3months forward 1.5879
6months forward 1.5932
12months forward 1.6041
3years forward 1.6328
5years forward 1.6538|
7years forward 1.6738
10years forward 1.7133
Britain
1 m forward
2 m forward
3 m forward
6 m forward
12 m forward
Europe
1 m forward
3 m forward
6 m forward
12 m forward
Japan
(pound) 2.4582
2.4559
2.454
2.4525
2.4474
2.4392
1.5504
1.5497
1.549
1.5489
1.5506
(Yen) 0.013034 0.008232
1 m forward 0.013066 0.008245
1.5526
1.5498
1.5472
1.5445
1.5362
1.5206
0.9792
0.9779
0.9755
0.9722
0.9666
0.631
0.6305
0.6298
0.6277
0.6234
0.6124
0.6047
0.5974
0.5837
(euro)
Cdn.$
in 2001:
High 1.5028
Low 1.6183
Average 1.5701
0.6654
0.6179
0.6369
3 m forward 0.013131
0.00827
6 m forward 0.013231 0.008305
12 m…
Suppose a U.S. firm purchases some Chinese handicrafts. The china costs 1,000 Chinese yuan. At the exchange rate of $1.00 = 6.2 yuan, the dollar price of the goods is:
J&D produces kindles in the Euro area and exports them to the United States. Last year the exchange rate was $1.20/Euro and J&D charged 130 Euros per kindle in the Euro area and $140 per kindle in the United States. Currently the spot exchange rate is $1.45/Euro and J&D is charging $158 per kindle. Calculate the degree of pass-through by J&D on their kindles and interpret your findings.A. The degree of pass-through is 0.6171. Therefore, only 38.29% of the exchange rate change was passed through to the U.S. dollar price. B. The degree of pass-through is 0.3829. Therefore, only 38.29% of the exchange rate change was passed through to the U.S. dollar price.C. The degree of pass-through is 0.6171. Therefore, only 61.71% of the exchange rate change was passed through to the U.S. dollar price. D. The degree of pass-through is 0.71. Therefore, only 71% of the exchange rate change was passed through to the U.S. dollar price. The remaining 29% has been absorbed by the company.
Chapter 16 Solutions
EBK FOUNDATIONS OF FINANCE
Ch. 16 - Prob. 1RQCh. 16 - Prob. 2RQCh. 16 - What is meant by arbitrage profits?Ch. 16 - Prob. 4RQCh. 16 - Prob. 5RQCh. 16 - Prob. 6RQCh. 16 - Prob. 7RQCh. 16 - Prob. 8RQCh. 16 - Prob. 9RQCh. 16 - Prob. 1SP
Ch. 16 - Prob. 2SPCh. 16 - Prob. 3SPCh. 16 - Prob. 4SPCh. 16 - (Exchange rate arbitrage) You own 10,000. The...Ch. 16 - Prob. 6SPCh. 16 - Prob. 7SPCh. 16 - Prob. 8SPCh. 16 - Prob. 9SPCh. 16 - Prob. 10SPCh. 16 - Prob. 11SPCh. 16 - (Purchasing-power parity) Lets assume a McDonalds...Ch. 16 - Prob. 1MCCh. 16 - Prob. 2MCCh. 16 - Prob. 3MCCh. 16 - d. What are the differences among a forward...Ch. 16 - Prob. 5MCCh. 16 - Prob. 6MCCh. 16 - Selling Quotes for Foreign Currencies in New York...Ch. 16 - Prob. 8MCCh. 16 - Prob. 9MC
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