(Real interest rates: financial analyst’s method) The CFO of your firm has asked you for an approximate answer to this question

(Real interest rates: financial analyst’s method) The CFO of your firm has asked you for an approximate answer to this question: What was the increase in real purchasing power associated with both 3-month Treasury bills and 30-year Treasury bonds? Assume that the current 3-month Treasury bill rate is 4.34 percent, the 30-year Treasury bond rate is 7.33 percent, and the inflation rate is 2.78 percent. Also, the chief financial officer wants a short explanation should the 3-month real rate turn out to be less than the 30-year real rate.

Click here for the solution: (Real interest rates: financial analyst’s method) The CFO of your firm has asked you for an approximate answer to this question

The Wall Street Journal reported the following spot and forward rates for the Swiss franc

The Wall Street Journal reported the following spot and forward rates for the Swiss franc:

Spot……………………$0.7876
30-day forward………$0.7918
90-day forward……… $0.7968
180-day forward………$0.8039

a. Was the Swiss franc selling at a discount or a premium in the forward market?
b. What was the 30-day forward premium (or discount)?
c. What was the 90-day forward premium (or discount)?
d. Suppose you executed a 90-day forward contract to exchange 100,000 Swiss francs into U.S. dollars. How many dollars would you get 90 days hence?
e. Assume a Swiss bank entered into a 180-day forward contract with Citicorp to buy $100,000. How many francs will the Swiss bank deliver in six months to get the U.S. dollars?

Click here for the solution: The Wall Street Journal reported the following spot and forward rates for the Swiss franc

Using Exchange Rates Take a look back at Figure 21.1 to answer the following questions

Using Exchange Rates Take a look back at Figure 21.1 to answer the following questions:

a) If you have $100, how many Euros can you get?

b) How much is one euro worth?

c) If you have 5 million Euros, how many dollars do you have?

d) Which is worth more, a New Zealand dollar or a Singapore dollar?

e) Which is worth more, a Mexican peso or a Chilean peso?

f) How many Mexican pesos can you get for a euro? What do you call this rate?

g) Per unit, what is the most valuable currency of those listed? The least valuable?

Click here for the solution: Using Exchange Rates Take a look back at Figure 21.1 to answer the following questions

(Using Spot and Forward Exchange Rates) Suppose the spot exchange rate for the Canadian dollar in Can $1.05 and the six- month forward rate is Can $1.07

(Using Spot and Forward Exchange Rates) Suppose the spot exchange rate for the Canadian dollar in Can $1.05 and the six- month forward rate is Can $1.07.

a) Which is worth more, a U.S. dollar or a Canadian dollar?

b) Assuming absolute PPP holds, what is the cost of the United States of an Elkhead beer if the price in Canada is Can$2.50? Why might the beer actually sell at a different price in the United States?

c) Is the U.S. dollar selling at a premium or a discount relative to the Canadian dollar?

d) Which currency is expected to appreciate in value?

e) Which county do you think has higher interest rates- the United States or Canada? Explain.

Click here for the solution: (Using Spot and Forward Exchange Rates) Suppose the spot exchange rate for the Canadian dollar in Can $1.05 and the six- month forward rate is Can $1.07