EASY PROBLEMS 1-4 (17-1) At today's spot exchange rates 1 U

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EASY PROBLEMS 1-4 (17-1) At today's spot exchange rates 1 U.S. dollar can be exchanged for 9 Mexican pesos or for Cross Rates 111.23 Japanese yen. You have pesos that you would like to exchange for yen. What is the cross rate between the yen and the peso; that is, how many yen would you receive for every peso exchanged? (17-2) The nominal yield on 6-month T-bills is 7%, while default-free Japanese bonds Interest Rate Parity that mature in 6 months have a nominal rate of 5.5%. In the spot exchange market, 1 yen equals $0.009. If interest rate parity holds, what is the 6-month forward exchange rate? (17-3) A computer costs $500 in the United States. The same model costs 550 euros in France. Purchasing If purchasing power parity holds, what is the spot exchange rate between the euro and the Power Parity dollar? (17-4) If euros sell for $1.50 (U.S.) per euro, what should dollars sell for in euros per dollar? Exchange Rate INTERMEDIATE PROBLEMS 5-8 (17-5) Suppose that the exchange rate is 0.60 dollars per Swiss franc. If the franc appreciates 10% Currency against the dollar, how many francs would a dollar buy tomorrow? Appreciation (17-6) Suppose the exchange rate between U.S. dollars and the Swiss franc is SFr1.6 = $1 and the Cross Rates exchange rate between the dollar and the British pound is £1 = $1.50. What then is the cross rate between francs and pounds? (17-7) Assume that interest rate parity holds. In both the spot market and the 90-day forward Interest Rate Parity market, 1 Japanese yen equals 0.0086 dollar. In Japan, 90-day risk-free securities yield 4.6%. What is the yield on 90-day risk-free securities in the United States? (17-8) In the spot market, 7.8 pesos can be exchanged for 1 U.S. dollar. A pair of headphones Purchasing costs $15 in the United States. If purchasing power parity holds, what should be the price Power Parity of the same headphones in Mexico? (17-9) Exchange Gains and Losses CHALLENGING PROBLEMS 9-14 Your Boston-headquartered manufacturing company, Wruck Enterprises, obtained a 50-million-peso loan from a Mexico City bank last month to fund the expansion of your Monterrey, Mexico, plant. The exchange rate was 10 U.S. cents per peso when you took out the loan, but since then the exchange rate has dropped to 9 U.S. cents per peso. Has Wruck Enterprises made a gain or a loss due to the exchange rate change, and how much? Note that your shareholders live in the United States. ultinational Financial Management (17-10) Results of Exchange Rate Changes In 1983, the Japanese yen-U.S. dollar exchange rate was 245 yen per dollar, and the dollar cost of a compact Japanese-manufactured car was $8,000. Suppose that now the exchange rate is 80 yen per dollar. Assume there has been no inflation in the yen cost of an automobile so that all price changes are due to exchange rate changes. What would the dollar price of the car be now, assuming the car's price changes only with exchange rates?