Principles of International Finance

FIN 612: Principles of International Finance I (003)
Homework 1
Adrian Joseph tibia?
September 28, 2011

1. BMW needs to barter for $10,000,000 to purchase CVJ boots (automotive parts) for its new Z4 toughie from
DuPont. BMWs banker quotes bid ask evaluate of $1.12-$1.14/A . What allow for be the euro cost of the
C
boots?
cause: Note that the rates ar constructed as the dollar bill worth of euro. Therefore, the trader (BMWs
banker) is willinging to buy the underlying currency (euro) at $1.12/A , the bid monetary value such that:
C
$1.12
A
C
A1
C
x = $10, 000, 000 ×
$1.12
x×

=

$10, 000, 000

= A 8, 928, 571
C

2. Deutsche Bank quotes bid-ask rates of EUR0.9850-0.9855/USD and 104.30-104.40/USD. What would
be the Deutsche Banks direct asking harm for yen in terms of euros (i.e. EUR/JPY)?
termination: The asking impairment for yen in terms of USD is the dollar price of yen. Since the bid-ask spread
$1
(ask?bid) is invariably positive, the asking price for yen in terms of USD is 104.30 , which is great than
$1
C
. The Bank also asks for A 0.9855 . Therefore,
104.40

$

A 0.9855
C
×
$

$1
A 0.009448706
C
?
104.30

3. If the JPY/USD telephone exchange rate is 104.30/$ and it takes 25.15 THB (Thai bahts) to purchase one
USD, what is the yen price of the baht?




Answer: We convert 25.15 THB/$ to 25.15$1
THB in order to compute the yen price of the baht, how
much yen is needed to buy one baht.
104.30
$1
×
?
$
25.15 THB

4.147117296/THB

4. The Mexican peso (MXN) has weakened substantially relative to the dollar (USD). call up the current
rate of exchange is MXN9.5/USD. Your investment advisor at Goldman Sachs argues that the peso
will lose 15% of its value relative to the dollar everyplace the next form. What is Goldman Sachs forecast
of the exchange rate in one year? Would your answer di?er if Goldman Sachs had predicted a 15%
appreciation of the dollar relative to the peso over the next year?
Answer: Goldman Sachs argues that the peso will depreciate relative...If you want to get a full essay, order it on our website: Ordercustompaper.com



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