Question
Answer both parts [i] and [ii]. Parts [i] and [ii] are independent of each other. [i] Assume that you are a Singaporean importer of top-grade
Answer both parts [i] and [ii]. Parts [i] and [ii] are independent of each other.
[i] Assume that you are a Singaporean importer of top-grade Australian Manuka Honey. Initially, the original price of top-grade Australian Manuka Honey exported to Singapore is 8000 Australian dollars (AUD) per tonne and the original exchange rate is 1.20 Singapore dollars (SGD) per AUD. If the SGD subsequently appreciates 20% and you adjust the price of top-grade Australian Manuka Honey in SGD to reflect a 75% exchange rate pass-through, what is the new price of top-grade Australian Manuka Honey in SGD? Explain and show your working clearly and completely.
[ii] Assume that you are a currency trader of forward exchange contracts in Germany. You observe the following spot and forward quotes for the United States dollar (USD) against the Euro (EUR): Spot rate (USD per EUR) USD/EUR 1.1760 1-month forward rate (USD per EUR) USD/EUR 1.1904 9-month forward rate (USD per EUR) USD/EUR 1.1927 12-month forward rate (USD per EUR) USD/EUR 1.1977 What are the forward premiums or discounts on the EUR? Explain and show your working clearly and completely. Give your final answers in annual percentage terms.
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Applied Equity Analysis and Portfolio Management Tools to Analyze and Manage Your Stock Portfolio
Authors: Robert A.Weigand
1st edition
978-111863091, 1118630912, 978-1118630914
