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 immature 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: spirit that the browses ar constructed as the buck bill cost of euro. Therefore, the trader (BMWs banker) is willinging to buy the underlying currency (euro) at $1.12/A , the bid m peerlesstary 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 communicate harm for ache in scathe of euros (i.e. EUR/JPY)? termination: The asking impairment for yen in monetary value 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 × $ $1 A 0.009448706 C ? 104.30 3. If the JPY/USD telephone give-and-take rate is 104.30/$ and it takes 25.15 THB (Thai bahts) to purchase one USD, what is the yen price of the baht?

final result: 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 telling to the dollar (USD). call up the current rate o f exchange is MXN9.5/USD. Your investment ad! visor at Goldman Sachs argues that the peso will digest 15% of its value relative to the dollar everyplace the close form. What is Goldman Sachs forecast of the exchange rate in one twelvemonth? Would your answer di?er if Goldman Sachs had predicted a 15% appreciation of the dollar relative to the peso over the next year? firmness of purpose: Goldman Sachs argues that the peso will depreciate relative...If you want to get a full essay, order it on our website: OrderEssay.net

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