Write or type your answers to the question in the space provided below; if you need more room, you can write on the back of this page. Or attach your answers to this page.
FOREIGN EXCHANGE MARKET: RISK, APPRECIATION,/DEPRECIATION
FORWARD CONTRACTS, RISK MANAGEMENT (7 questions in total).
1) One of the functions of the foreign exchange market is to convert currencies. Convert the currencies as indicated below (note how the rate is presented in order to determine how to calculate the amount you would receive): (1 point)
CONVERT RATE AMOUNT
100,000 US$ 1 US$ = 108.14 yen (¥) yen (¥) 10,814,000
45,000 US$ 1 US$ = 13.5033 Mex. Peso Mex. Peso 607,648.5
1200 US$ 1 Euro(€) = 1.2624 US$ Euro (€) 1,514.88
250 Brit.Pound (£) 1 BritPound(£) = 1.5360 US$ US$ 162.76
150,000 Indian rupee INR 1 US$ = 60.9610 INR US$ 9,144,150
2500 Australian $ 1 US $ = 1.3542 Aus.$ US$ 3,385.5
2) Explain what appreciation of a currency means. Explain what depreciation of a currency means. (1 point)
3) What is Foreign Exchange risk? (1 point)
4) Analyze the following exchange rates and identify if the subject currencies indicated are appreciating or depreciating in value based on the “new” rates quoted. (2 points)
OLD RATE NEW RATE SUBJECT APP/DEP?
1 US$ = 90.20 Swiss Franc 1 US$ = 95.38 Swiss Franc Swiss Franc
1 ThBaht = US$ .0282 1 ThBaht = US$ .0296 Thai baht
108¥ Jap. yen = 1 US$ 98¥ Jap. yen = 1 US$ Japanese yen
1 Russ. ruble= US$ .0281 1 Russ. Ruble = US$ .0238 US dollar
1 US$ = 6.8365 Swed.krona 1US$ = 7.2773 Swed. krona Swedish krona
1Euro(€) = US$ 1.3719 1Euro(€) = US$ 1.38957 Euro
1US$ = 1,014.95 So.Kor.won 1US$ = 1,053.11So.Kor.won US dollar
1 US$ = 1.0188 Can. $ 1 US$ = .9645 Can. $ Canadian dollar
1 US$ = 7.5610 Arg. Peso 1 US$ = 7.86029Arg. Peso Argentine peso
13.0260 MXP = 1 US$ 13.0560 MXP = 1 US$ Mexican peso
Page one of two
5) What are forward exchange contracts? What is their purpose? What does it mean when a currency is selling at “discount on forward”? What does it mean when a currency is selling at “premium on forward”? (2 points)
6) Analyze the spot and forward rates quoted below. Identify if the expectation is, based on the forward rates, that the subject currencies indicated are going to appreciate or depreciate in value and if they are selling at a discount or premium on the forward rate. (The subject currency is what you hold and must convert) (1.5 points)
COUNTRY SPOT RATE FORWARD RATE SUBJECT APP/DEP DISC/PREM on FWD?
GERMANY 1.2667 US$/ Euro 1.1116 US $/Euro EURO
GREAT BRITAIN 1.6608 US $/£ 1.3930 US $/£ BRITISH POUND
CANADA .87350 US $/ CAD .8898 US$/CAD CANADIAN DOLLAR
JAPAN .00874 US $/ ¥ .00946 US $/ ¥ YEN
7) Read the Closing Case: “Billabong” on pages 318-19 of the textbook (10th ) and answer the following questions about foreign exchange risk management. (2 points)
a) Why does a fall in the value of the Australian dollar against the U.S. dollar benefit Billabong?
b) Could the rise in the value of the Australian dollar that occurred in 2009 have been predicted?
c) What might Billabong had done in order to better protect itself against the unanticipated rise in the value of the Australian dollar that occurred in 2009?
d) The Australian dollar continued to rise by another 20 percent against the U.S. dollar in between 2010 and 2012. How would this have affected Billabong? Is there anything that Billabong might have done to limit its long-term economic exposure to changes in the value of the currency in its largest export market?
Our Service Charter
-
Excellent Quality / 100% Plagiarism-Free
We employ a number of measures to ensure top quality essays. The papers go through a system of quality control prior to delivery. We run plagiarism checks on each paper to ensure that they will be 100% plagiarism-free. So, only clean copies hit customers’ emails. We also never resell the papers completed by our writers. So, once it is checked using a plagiarism checker, the paper will be unique. Speaking of the academic writing standards, we will stick to the assignment brief given by the customer and assign the perfect writer. By saying “the perfect writer” we mean the one having an academic degree in the customer’s study field and positive feedback from other customers. -
Free Revisions
We keep the quality bar of all papers high. But in case you need some extra brilliance to the paper, here’s what to do. First of all, you can choose a top writer. It means that we will assign an expert with a degree in your subject. And secondly, you can rely on our editing services. Our editors will revise your papers, checking whether or not they comply with high standards of academic writing. In addition, editing entails adjusting content if it’s off the topic, adding more sources, refining the language style, and making sure the referencing style is followed. -
Confidentiality / 100% No Disclosure
We make sure that clients’ personal data remains confidential and is not exploited for any purposes beyond those related to our services. We only ask you to provide us with the information that is required to produce the paper according to your writing needs. Please note that the payment info is protected as well. Feel free to refer to the support team for more information about our payment methods. The fact that you used our service is kept secret due to the advanced security standards. So, you can be sure that no one will find out that you got a paper from our writing service. -
Money Back Guarantee
If the writer doesn’t address all the questions on your assignment brief or the delivered paper appears to be off the topic, you can ask for a refund. Or, if it is applicable, you can opt in for free revision within 14-30 days, depending on your paper’s length. The revision or refund request should be sent within 14 days after delivery. The customer gets 100% money-back in case they haven't downloaded the paper. All approved refunds will be returned to the customer’s credit card or Bonus Balance in a form of store credit. Take a note that we will send an extra compensation if the customers goes with a store credit. -
24/7 Customer Support
We have a support team working 24/7 ready to give your issue concerning the order their immediate attention. If you have any questions about the ordering process, communication with the writer, payment options, feel free to join live chat. Be sure to get a fast response. They can also give you the exact price quote, taking into account the timing, desired academic level of the paper, and the number of pages.