You are required to forecast the expected change in the exports to the USA from China and Japan. The spot rate is 200 Japanese yen per yuan. The spot rate 6-months before was 180 Japanese yen per Yuan. The value of Chinese yuan is tied with the US$ and it will be. a. From China remain same, from Japan will increase. b. From China will increase, from Japan will remain same. c. From China remain same, from Japan will decrease. d. From China will decrease, from Japan will remain same. Answer Subnit

You are required to forecast the expected change in the exports to the USA from China and Japan. The spot rate is 200 Japanese yen per yuan. The spot rate 6-months before was 180 Japanese yen per Yuan. The value of Chinese yuan is tied with the US$ and it will be. a. From China remain same, from Japan will increase. b. From China will increase, from Japan will remain same. c. From China remain same, from Japan will decrease. d. From China will decrease, from Japan will remain same. Answer Subnit

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter9: Forecasting Exchange Rates

Section: Chapter Questions

Problem 31QA

See similar textbooks

Similar questions

Suppose that a US-based company is buying Chinese goods. Current exchange rate for Chinese Yuan is 0.15 USD. The price of goods is ¥13,000 per unit. The company is buying 800 units per year with a fixed contract for the next two years. Suppose that Chinese Yuan appreciate to 0.2 USD in the next year. The US importer will respond to this by lowering the demand to 600 units in the third year. What cash flow will be reflected on the balance of payments at the end of the third year? Your Answer:
assuming japan to be the home country, suppose you have the following data: Japanese interst rate=1% p.a., Brazilian interest rate = 10% p.a. Spot rate=0.025BRL/Yen, 1 year forward rate=0.026BRL/yen 1). Compute the annualized forward premium/discount on Yen b). Compute the annual interest rate differential between countries c). is tere a possibilit for earning risk-free profit? if soc compute the profit if you have an equivalent of 100 million Yen at your disposal. d). what is such a profit called? e). at what forward rate, the profit making arrangement will lose its lucrativeness?
A bundle of goods in Japan costs ¥2,642,000 while the same goods and services cost $32,500 in the United States. a. If purchasing power parity holds, what is the current exchange rate of U.S. dollars for yen? b. If, over the next year, inflation is 8 percent in Japan and 10 percent in the United States, what will the goods cost next year? c. Will the dollar depreciate or appreciate relative to the yen over this time period?
Sing Tao wants to import goods for 2.54 million Australian dollar (A$) and pay to Australian exporter, WA Co., in one year. Sing Tao also wants to minimise its exchange rate risk for the payment of A$2.54 million by taking the forward market hedging strategy. Calculate the Chinese yuan (CNY) costs using the forward market hedging strategy based on the information in Table 1. (Enter the whole number without sign and symbol).
Samuel Samosir works for Peregrine Investments in Jakarta, Indonesia. He focuses his time and attention on the U.S. dollar/Singapore dollar ($/S$) cross-rate. The current spot rate is $1.39/S$. After considerable study, he has concluded that the Singapore dollar will depreciate versus the U.S. dollar in the coming 90 days, probably to about $1.35/S$. He is considering trading options to profit and has the following options on the Singapore dollar to choose from: Option choices on the Singapore dollar: Strike price (US$/Singapore dollar) Premium (US$/Singapore dollar) Call on S$ $1.34 $0.075 Put on S$ $1.37 $0.006 Samuel decides to sell call options in Singapore dollars. What is Samuel's (net) profit/loss (in dollars) per option if the spot rate is $1.56/S$ at maturity?
Samuel Samosir works for Peregrine Investments in Jakarta, Indonesia. He focuses his time and attention on the U.S. dollar/Singapore dollar ($/S$) cross-rate. The current spot rate is $1.39/S$. After considerable study, he has concluded that the Singapore dollar will depreciate versus the U.S. dollar in the coming 90 days, probably to about $1.34/S$. He is considering trading options to profit and has the following options on the Singapore dollar to choose from: Option choices on the Singapore dollar: Strike price (US$/Singapore dollar) Premium (US$/Singapore dollar) Call on S$ $1.35 $0.047 Put on S$ $1.36 $0.046 Samuel decides to buy put options on Singapore dollars. What is Samuel's (net) profit/loss (in dollars) if the spot rate is $1.31/S$ at maturity? Keep the sign and all decimal numbers.
Sing Tao wants to import goods for 2.12 million Australian dollar (A$) and pay to Australian exporter, WA Co., in one year. Sing Tao also wants to minimise its exchange rate risk for the payment of A$2.12 million by taking the money market hedging strategy. Calculate the Chinese yuan (CNY) costs using the money market hedging strategy based on the information in Table 1. (Enter the whole number without sign and symbol). TABLE 1 For Chinese yuan (CNY) Spot rate A$0.3213/CNY One-year forward rate A$0.2381/CNY One-year CNY deposit and borrowing rate 3.21% One-year call options Exercise price = A$0.31 Premium = A$0.02 One-year put options Exercise price = A$0.53 Premium = A$0.03 For Australian dollar (A$) Spot rate CNY3.4201/A$ One-year forward rate CNY1.213/A$ One-year A$ deposit and borrowing rate 2.31% One-year call options Exercise price = CNY2.34 Premium = CNY0.12…
In June 2006, a Korean investor is considering investing 100 Wons in bank deposits in Korea (in Won) or Japan (in Yens). The annual interest rate on Korean deposits is 6.25%, versus 2% on deposits in Japan. Suppose that the current exchange rate in June 2006 is 8 Wons/Yen and the expected exchange rate in June 2007 is Fwon/Yen= 8.2 Wons/Yen. What is the best investment strategy for the Korean investor? Explain carefully why? Does the interest parity hold? Why or why not?
a) Assume the following information: 180‑day U.S. interest rate = 8% 180‑day British interest rate = 9% 180‑day forward rate of British pound = $1.50 Spot rate of British pound = $1.48 Assume that a U.S. exporter will receive 400,000 pounds in 180 days. Would it be better off using a forward hedge or a money market hedge? Substantiate your answer with estimated revenue for each type of hedge. b) As treasurer of a U.S. exporter to Canada, you must decide how to hedge (if at all) future receivables of 250,000 Canadian dollars 90 days from now. Put options are available for a premium of $.03 per unit and an exercise price of $.80 per Canadian dollar (CA$). The forecasted spot rate of the CA$ in 90 days follows: Future Spot Rate Probability (%) $.75 50…
Let the spot rate be Yen 100 / $ and the 3-month forward rate be Yen 99/$. Compute the interest rate differential between the U.S. and Japan at which interest rate parity will hold true. *Show manual workings. No Excel. You can type calculator inputs and outputs.
The interest rate in Japan is 0.5% and the interest rate in the US is 4.5%. The spot exchange rate is ¥100 per dollar and the one year ahead forward rate is ¥98 per dollar. What is the profit made via covered interest arbitrage if you start by borrowing 1 million yen and investing in the US market? Assume borrowing and lending rates are identical. State the profits in dollars.
16. Assume that the export price of a Toyota Corolla from Osaka, Japan is ¥2,150,000. The exchange rate is ¥294/OMR. The forecast rate of inflation in the Oman is 2.2% per year and is 0.0% per year in Japan. Use this data to answer the following questions on exchange rate pass–through. a. What was the export price for the Corolla at the beginning of the year expressed in Omani Rials? b. Assuming purchasing power parity holds, what should the exchange rate be at the end of the year? c. Assuming 100% pass–through of exchange rate, what will be the dollar price of a Corolla at the end of the year?