1. A currency trader observes that in the spot exchange market, one U.S. dollar can be exchanged for 3.6033 Israeli shekels or for 114.4 Japanese yen. What is the cross-exchange rate between the yen and the shekel; that is, how many yen would you receive for every shekel exchanged? Round your answer to two decimal places. ???yen???per???shekel 2. A television set costs $530 in the United States. The same set costs 319.5 euros. If purchasing power parity holds, what is the spot exchange rate between the euro and the dollar? Round your answer to two decimal places. $1???=??? ???euros 3. Look up the 6 currencies in the tables in the foreign exchange section of a current issue of The Wall Street Journal. Sample Exchange Rates: Monday, May 26, 2008 -------------------------------------------------------------------------------- ? Direct Quotation: U.S. Dollars Required to Buy One Unit of Foreign Currency (1) Indirect Quotation: Number of Units of Foreign Currency per U.S. Dollar (2) -------------------------------------------------------------------------------- British pound $1.7471 0.5724 Canadian dollar $0.8206 1.2186 Euro $1.2069 0.8286 Japanese yen $0.008974 111.43 Mexican peso $0.0931 10.7400 Swedish krona $0.1281 7.8064 -------------------------------------------------------------------------------- Current Sample Exchange Rates: November 16, 2008 -------------------------------------------------------------------------------- ? Direct Quotation: U.S. Dollars Required to Buy One Unit of Foreign Currency (1) Indirect Quotation: Number of Units of Foreign Currency per U.S. Dollar (2) -------------------------------------------------------------------------------- British pound $1.7360 0.5760 Canadian dollar $0.8388 1.1922 Euro $1.1727 0.8527 Japanese yen $0.008415 118.84 Mexican peso $0.0939 10.6500 Swedish krona $0.1218 8.2102 -------------------------------------------------------------------------------- Note: Column 2 equals 1.0 divided by Column 1. However, rounding differences do occur. a. What is the current exchange rate for changing dollars into 1,000 units of pounds? Round your answer to two decimal places. b. What is the current exchange rate for changing dollars into 1,000 units of Canadian dollars? Round your answer to two decimal places. c. What is the current exchange rate for changing dollars into 1,000 units of euros? Round your answer to two decimal places. d. What is the current exchange rate for changing dollars into 1,000 units of yen? Round your answer to two decimal places. e. What is the current exchange rate for changing dollars into 1,000 units of Mexican pesos? Round your answer to two decimal places. f. What is the current exchange rate for changing dollars into 1,000 units of Swedish kronas? Round your answer to two decimal places. What is the percentage gain or loss between the May 26, 2008, exchange rate and the current exchange rate for each of the currencies in parts a-f? Round your answers to two decimal places. g. Pound = ??? ?% h. Canadian dollar = ??? ?% i. Euro = ??? ?% j. Yen = ??? ?% k. Peso = ??? ?% l. Krona = ??? ?% 4. Suppose that 1 Danish krone could be purchased in the foreign exchange market for 8 U.S. cents today. If the krone appreciated 12% tomorrow against the dollar, how many krones would a dollar buy tomorrow? Round your answer to two decimal places. ???krones 5. Suppose the exchange rate between the U.S. dollar and the Swedish krona was 10 krona = $1.00, and the exchange rate between the dollar and the British pound was 1 pound = $1.75. What was the exchange rate between Swedish kronas and pounds? Round your answer to two decimal places. ???kronas???per???pound 6. Problem 19-9. Cross exchange rates The table below gives the exchange rates between U.S. dollar, British pound and Swedish krona. What is the exchange rate between Swedish kronas and pounds? Round your answer to two decimal places. ? U.S. $ Equivalent Currency per U.S. $ ? -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- British pound 1.7360 0.5760 Swedish krona 0.1218 8.2102 =________ ???kronas???per???pound 7. Assume that interest rate parity holds. In both the spot market and the 90-day forward market 1 Japanese yen equals 0.0091 dollar. And 90-day risk-free securities yield 6.4% in Japan. What is the yield on 90-day risk-free securities in the United States? Round your answer to two decimal places. ?% 8. Assume that interest rate parity holds and that 90-day risk-free securities yield 3.6% in the United States and 3.78% in Britain. In the spot market 1 pound equals 2.23 dollars. What is the 90-day forward rate? Round your answer to two decimal places. 9. Early in September 1983, it took 260 Japanese yen to equal $1. Nearly 25 years later, in July 2008 that exchange rate had fallen to 121 yen to $1. Assume the price of a Japanese-manufactured automobile was $8,000 in September 1983 and that its price changes were in direct relation to exchange rates. a. Has the price, in dollars, of the automobile increased or decreased during the 25-year period because of changes in the exchange rate? -Select-increaseddecreased b. What would the dollar price of the automobile be in July 2008, again assuming that the car's price changes only with exchange rates? Round your answer to two decimal places. 10. After all foreign and U.S. taxes, a U.S. corporation expects to receive 3 pounds of dividends per share from a British subsidiary this year. The exchange rate at the end of the year is expected to be $1.95 per pound, and the pound is expected to depreciate 5% against the dollar each year for an indefinite period. The dividend (in pounds) is expected to grow at 5% a year indefinitely. The parent U.S. corporation owns 9 million shares of the subsidiary. What is the present value in dollars of its equity ownership of the subsidiary? Assume a cost of equity capital of 15% for the subsidiary. Round your answer to two decimal places