International Finance - Exercises&cases
1. The U.S. dollar suddenly changes in value against the euro moving from an
exchange rate of $0.8909:€ to $0.8709:€. Thus, the dollar has ________ by ________.
a. appreciated; 2.30%
b. depreciated; 2.30%
c. appreciated; 2.24%
d. depreciated; 2.24%
2. Assume that a bank´s bid for Canadian dollars (CAD) is $0.7938 while its ask price is
$0.81. What is the bid/ask percentage spread?
3. Mississippi Mud Pies, Inc. needs to buy 1,000,000 Swiss francs (CHF) to pay its Swiss
chocolate supplier. Its banker quotes bid–ask rates of CHF1.3990–1.4000:USD. What will
be the dollar cost of the CHF1,000,000?
4. Compute the forward discount or premium for the Euro whose 90-day forward rate is
$1.102 and spot rate is $1.10.
5. If a dollar worth 1.7 Euros, what is the dollar value of a Euro?
6. From the viewpoint of a British investor, which of the following would be a direct quote in
the foreign exchange market?
a. SFr2.40:£
b. $1.50:£
c. £0.55:€
d. $0.90:€
7. If the direct quote for a U.S. investor for British pounds is $1.43:£, then the indirect quote
for the U.S. investor would be ________ and the direct quote for the British investor would
be________:
a. £0.699:$; £0.699:$
b. $0.699:£; £0.699:$
c. $1.43:£; £0.699:$
d. £0.699:$; $1.43:£
8. Given the following pair wise exchange rates $1.8410:£ and $1.2223:€, estimate the crossrate of pounds per euro.
a. £1.000:€
b. £1.5062:€
c. £0.6639:€
d. €1.5062:£
9. Assume that a Euro is worth 1.17 U.S. dollars (USD) and a Japanese yen is worth 0.008
U.S. dollars. What is the cross-rate of the Euro per Japanese yen?
10. Given the following quotations (where the dollar is the home currency),
what is the annualized forward premium (discount) on the U.S. dollar?
Spot rate: $1.305:€ 6-month forward rate: $1.335:€
a. premium; 4.4944%
b. premium; 4.5977%
c. discount; 4.4944%
d. discount; 4.5977%
11. If the spot exchange rate of the yen relative to the dollar is ¥105.75, and the 90-day
forward rate is ¥103.25:$, is the dollar at a forward premium or discount? Express the
premium or discount as a percentage per annum for a 360-day year?
12. As a foreign exchange trader, you see the following quotes for Canadian dollars (CAD),
U.S. dollars (USD), and Mexican pesos (MXN):
CAD1.419/USD
MXN6.4390/CAD
MXN8.7535/USD
Is there an arbitrage opportunity, and if so, how would you exploit it?
13. Consider the following spot and forward rates for the yen:euro exchange rates:
Spot
30 days
60 days
90 days
180 days
360 days
146.30
145.75
145.15
144.75
143.37
137.85
Is the euro at a forward premium or discount? What are the magnitudes of the forward
premiums or discounts when quoted in percentage per annum for a 360-day year?