1. Exchange rate essentials

Use the hypothetical information in the following table to answer the questions that follow.

Country	Currency Symbol	Exchange Rates
(Currency)	On May 1, 2017	On May 1, 2018
Per $	Per ?	Per $	Per ?
Canada (dollar)	C$	1.372	1.644	1.26	1.622
Eurozone (euro)	? or EUR	0.835	?	0.777	?
Japan (yen)		110.5	132.4	104.8	134.9
United Kingdom (pound)		0.562	0.674	0.524	0.675
United States (dollar)	$	?	1.198	?	1.287

The U.S. exchange rate against the British pound on May 1, 2018, was per pound ().

Using information from the previous table, indicate whether each currency listed in the following table appreciated or depreciated against another currency between May 1, 2017, and May 1, 2018.

Currency	Appreciated	Depreciated
The Canadian dollar against the U.S. dollar
The U.S. dollar against the Japanese yen
The British pound against the euro

Over the period of May 1, 2017, to May 1, 2018, the U.S. dollaragainst the euro by. The euroagainst the Canadian dollar by.

1. Exchange rate essentials Use the hypothetical information in the following table to answer the questions that follow. Country Exchange Rates (Currency) On May 1, 2017 On May 1, 2018 Currency Symbol Per $ Per C Per $ Per C Canada (dollar) C$ 1.372 1.644 1.26 1.622 Eurozone (euro) E or EUR 0.835 0.777 Japan (yen) 110.5 132.4 104.8 134.9 United Kingdom (pound) 0.562 0.674 0.524 0.675 United States (dollar) 1.198 1.287 The U.S. exchange rate against the British pound on May 1, 2018, was per pound (E). Using information from the previous table, indicate whether each currency listed in the following table appreciated or depreciated against an currency between May 1, 2017, and May 1, 2018- Currency Appreciated Depreciated The Canadian dollar against the U.S. dollar O O The U.S. dollar against the Japanese yen O O The British pound against the euro O O Over the period of May 1, 2017, to May 1, 2018, the U.S. dollar against the euro by . The euro against the Canadian dollar bySaddleback... CENGAGE | MINDTAP Q Search this cours Homework 7 (Ch 11) made in Great Britain change in the United States, causing U.S. consumers to purchase fewer goods and services made in Great Britain. Illustrate how this change affects the market for pounds by shifting one or both of the curves on the following graph. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. (?) O Supply Demand Supply U.S. DOLLARS PER POUND Demand POUNDS against the pound. Which of the following is a disadvantage of this This change in the market for pounds causes the U.S. dollar to change in the demand for foreign currency for the United State depreciate O U.S. exporting firms find it easier to sell goods in Brit appreciate O U.S. exporting firms find it more difficult to compete in the British market."CENGAGE | MINDTAP Q Search thi Homework 7 (Ch 11) Back to Assignment Attempts Keep the Highest / 2 3. Arbitrage and spot exchange rates Suppose you trade dollars and euros for a bank that has branches in New York and Rome. You can electronically transfer the funds between the two branch locations at no cost, and trading commissions are negligible. The current dollar-per-euro exchange rate in New York is Es/ BUR - 1.5952, while in Rome, it is Es / BUR" RO - 1.6244. You can make a profit for the bank if you buy euros in and sell them in Rome Assuming other foreign exchange traders face the sam rates you do, they will buy dollars in and sell them in - As a result, the dollar-per-euro exch New York |Rome (Es / BUR) PRO ) will , and the dollar-per-euro exchange rate in New York ( Es / BUR NY) will Grade It Now Save & Continue Continue without savingCENGAGE | MINDTAP Homework 7 (Ch 11) Back to Assignment Attempts Keep the Highest / 2 4. The forward rate Suppose the selling price of the t -0.00159 forward British pound is $1.5134 per pound, and the spot price is $1.5139 per pound. Complete the following formula for the per anni 0.00106 ge premium (or discount) to calculate what the pound is worth in the three-month forward market. 0.00132 X Therefore, the British pound is at a against the U.S. dollar, because it is worth in the three-month forward market than in the spot market.Back to Assignment Attempts Keep the Highest / 2 5. Covered versus uncovered interest arbitrage On May 31, Beth, an American investor, decided to buy three-month Treasury bills. She found that the per-annum interest rate on three-month Treasury bills is 7.00% in New York and 9.00% in Tokyo, Japan. Based on this information and assuming that tax costs and other transaction costs are negligible in the two countries, it is in Beth's best interest to purchase three-month Treasury bills in ,because it allows her to earn more for the three months. 0.50% the spot rate for the yen was $0.100, and the selling price of the three-month forward yen was $0.099. At that time, Beth chose to ignore 0.17% ence in exchange rates. In three months, however, the spot rate for the yen rose to $0. 102 per yen. When Beth converted the investment proceeds back into U.S. dollars, her actual return on investment was As a result of this transaction, Beth realizes that there is great uncertainty about how many dollars she will receive when the Treasury bills mature. So, she decides to adjust her investment strategy to eliminate this uncertainty. What should Beth's strategy be the next time she considers investing in Treasury bills? Sell enough foreign currency on the forward market to match the anticipated proceeds from the investment. Exchange large amounts of domestic currency for foreign currency. Exchange large amounts of foreign currency for domestic currency. Had Beth used the covered interest arbitrage strategy on May 31, her net return on investment (relative to purchasing the U.S. Treasury bills) in Japanese three-month Treasury bills would be . (Note: Assume that the cost of obtaining the cover is zero.)