5.) Find the percent changes in the renminbi and in the dollar. Beginning value RMB8.28/S. Current value RMB6.3/S. 6.) Do high interest rates lead to weak currencies, or do weak currencies lead to high interest rates? 7.) Consider the dollar-sterling exchange rate. Bid Ask $1.4065 $1.4075 Spot Forward Points 3-months 6-months 50 45 60 50 Is the dollar trading at a forward premium or discount? 8.) Your US corporation has a CNY1,000,000 account payable due in 6 months. To hedge its currency risk your company enters into an NDF contract. The current spot rate is CNY6.75/S, the NDF contract rate is CNY6.60/S, and the spot rate 6 months from today is CNY6.50/$. a.) Does your company make a payment or receive $ when the NDF contract is settled? b.) How much is the payment or receipt? Some problems from the text book: 9.) Over the past five years, the exchange rate between the pound and the dollar has changed from $1.90/f to $1.45/E. Would you agree that over the 5-year period, British goods have become cheaper for buyers in the US? 10.) A foreign exchange trader with a US bank took a short position of 5,000,000 when the exchange rate was $1.55/. Subsequently, the exchange rate changed to $1.61/. Is this movement in the exchange rate good from the point of view of the trader? By how much has the bank's dollar liability changed because of the change in the exchange rate