International-Financial-Management---Bekaert-2e---Solutions---Ch02Word文档格式.doc

International-Financial-Management---Bekaert-2e---Solutions---Ch02Word文档格式.doc

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QUESTIONS

1.Whatisanexchangerate?

Answer:

Anexchangerateistherelativepriceoftwocurrencies,liketheU.S.dollarpriceoftheeuro,theThaibahtpriceoftheMalaysianringgit,ortheMexicanpesopriceoftheCanadiandollar.

2.Whatisthestructureoftheforeignexchangemarket?

IsitliketheNewYorkStockExchange?

Theinterbankforeignexchangemarketisaverylarge,diverse,over-the-countermarket,notaphysicaltradingplacewherebuyersandsellersgathertoagreeonapricetoexchangecurrencies.Traders,whoareemployeesoffinancialinstitutionsinthemajorfinancialcitiesaroundtheworld,dealwitheachotherprimarilyoverthephoneorviacomputer,withwrittenorformalelectronicconfirmationsoftransactionsoccurringonlylater.

3.Whatisaspotexchangeratecontract?

Whendoesdeliveryoccuronaspotcontract?

Whencurrenciesintheinterbankspotmarketaretraded,certainbusinessconventionsarefollowed.Forexample,whenthetradeinvolvestheU.S.dollar,businessconventiondictatesthatspotcontractsaresettledin2businessdays—thatis,thepaymentofonecurrencyandreceiptoftheothercurrencyoccursin2businessdays.Onebusinessdayisnecessarybecauseoftheback-officepaperworkinvolvedinanyfinancialtransaction.Theseconddayisneededbecauseofthetimezonedifferencesaroundtheworld.

Severalexceptionstothe2-business-dayrulearenoteworthy.First,forexchangesbetweentheU.S.dollarandtheCanadiandollarortheMexicanpeso,theruleis1businessday.Second,ifthetransactioninvolvesthedollarandthefirstofthe2daysisaholidayintheUnitedStatesbutnotintheothersettlementcenter,thefirstdayiscountedasabusinessdayforsettlementpurposes.Third,FridaysarenotpartofthebusinessweekinmostMiddleEasterncountries,althoughSaturdaysandSundaysare.Hence,non–MiddleEasterncurrenciessettleonFridays,andMiddleEasterncurrenciessettleonSaturdays.

4.WhatwastheJapaneseyenspotpriceoftheU.S.dollaronDecember21,2010?

ExaminingExhibit2.5forDecember21,2010wefindthattheJapaneseyenspotpriceoftheU.S.dollarwas¥

84.12/$.

5.WhatwastheU.S.dollarspotpriceoftheSwissfranconDecember21,2010?

ExaminingExhibit2.5forDecember21,2010,wefindthattheU.S.dollarspotpriceoftheSwissfrancwas$1.0289/CHF.

6.Howlargearethebid–askspreadsintheinterbankspotmarket?

Whatistheirpurpose?

Thepurposeofthebid-askspreadistoallowtraderstoprofitbybuyingacurrencyatalowbidpriceandsellingthatcurrencyatahigheraskprice.Bid–askspreadsinthespotforeignexchangemarketarequitesmall,oftenonlytwoorthreebasispoints.Forexample,ayen–dollartradermightquoteabidpriceofyenperdollaratwhichsheiswillingtobuydollarsinexchangeforyenof,say,¥

83.74/$.Thetraderwouldthenquoteahigheraskpriceatwhichsheiswillingtoselldollarsforyen,say,atanexchangerateof¥

83.76/$.Thispercentagebid-askspreadis

7.WhatwastheeuropriceoftheBritishpoundonDecember21,2010?

Why?

Wecanfindthisinformationtwoways.Thecross-ratequotefromExhibit2.6is€1.1818/£

.TheexchangeratesofeurosperdollaranddollarsperpoundfromExhibit2.5are€0.7636/$and$1.5477/£

.Weknowthattherewouldbeatriangulararbitragepossibilityifthecross-ratediffersfromtheindirectrateusingthedollarasanintermediary.Thus,wefindthesamevalueifwecalculate

8.IfthedirecteuropriceoftheBritishpoundishigherthantheindirecteuropriceoftheBritishpoundusingthedollarasavehiclecurrency,howcouldyoumakeaprofitbytradingthesecurrencies?

IfthedirecteuropriceoftheBritishpoundishigherthantheindirecteuropriceoftheBritishpoundusingthedollarasavehiclecurrency,therewouldbeatriangulararbitrage.Wewouldwanttobuypoundsattheindirectlowpriceandsellpoundsatthedirecthighprice.SupposeinQuestion7thatthedirectpriceeurosperpoundwere€1.2115/£

andtheexchangeratesversusthedollarare€0.7636/$and$1.5477/£

.Theindirecteuropriceofthepoundistherefore

Ifwestartwith€10,000,000,wecanconverteurostodollarsandget

€10,000,000/€0.7636/$=$13,095,862

Convertingthesedollarsintopoundsgives

$13,095,862/$1.5477/£

=£

8,461,499

Convertingthesepoundsintoeurosgives

€1.2115/£

£

8,461,499=€10,251,106

Thus,wemakeaprofitof€251,106or2.51%.

9.Whatisanappreciationofthedollarrelativetothepound?

Whathappenstothedollarpriceofthepoundinthissituation?

Anappreciationofthedollarrelativetothepoundmeansthatittakesfewerd