Answers to questions 9-13 ,17, & 18 please! thank you

1. Pulau Penang Island Resort. Theresa Nunn is plan- ning a 30-day vacation on Pulau Penang, Malaysia, one year from now. The present charge for a luxury suite plus meals in Malaysian ringgit (RM) is RM1,045/day. The Malaysian ringgit presently trades at RM3.1350/$. She determines that the doliar cost today for a 30-day stay would be $10,000. The hotel informs her that any increase in its room charges will be limited to any increase in the Malaysian cost of living, Malaysian inflation is expected to be 2.75% per annum, while US. inflation is expected to be 1.25%. a. How many dollars might Theresa expect to need one year hence to pay for her 30-day vacation? b. By what percent will the dollar cost have gone up? Why? the past week. Takeshi wonders if he should try an uncovered interest arbitrage (UIA) and thereby save the cost of forward cover. Many of Takeshi's research associates and their computer models are predict- ing the spot rate to remain close to Y118.00/5 for the coming 180 days Using the same data as in Problem 7 analyze the UIA potential. 9. Copenhagen Covered (A). Heidi Hoi Jensen, a foreign exchange trader at JP Morgan Chase, can invest $5 mil. lion, or the foreign currency equivalent of the bank's short-term funds, in a covered interest arbitrage with Denmark. Using the following quotes, can Heidi make a covered interest arbitrage (CIA) profit? Arbitrage funds available Spot exchange rate (kr/5) 3-month forward rate (kr/S) U.S. dollar 3-month interest rate Danish kroner 3-month interest rate $5,000,000 6.1720 6.1980 3.000% 5.000% 6. Corolla Exports and Pass-Through. Assume that the export price of a Toyota Corolla from Osaka, Japan is 12,150,000. The exchange rate is 1876018. The fore- cast rate of inflation in the United States is 2.2% per year and in Japan it is 0.0% per year. Use this data to answer the following questions on exchange rate pass-through a. What was the export price for the Corolla at the beginning of the year expressed in US dollars? b. Assuming purchasing power parity holds, what should be the exchange rate at the end of the year? c. Assuming 100% exchange rate pass through, what will be the dollar price of a Corolla at the end of the year? d. Assuming 75% exchange rate pass-through, what will be the dollar price of a Corolla at the end of the year? 10. Copenhagen Covered (B). Heidi Hol Jensen is now evaluating the arbitrage profit potential in the same market after interest rates change. Note that any time the difference in interest rates does not exactly equal the forward premium, it must be possible to make a CLA profit one way or another.) 7. Takeshi Kamada--CIA Japan (A). Takeshi Kamada, a foreign exchange trader at Credit Suisse (Tokyo), is exploring covered interest arbitrage possibilities. He wants to invest $5,000,000 or its yen equivalent, in a covered interest arbitrage between US dollars and Jap- anese yen. He faced the following exchange rate and interest rate quotes. Is CIA profit possible? If so, how? Arbitrage funds available $5,000,000 Spot exchange rate (kr/S) 6.1720 3-month forward rate (kr/5) 6.1980 U.S. dollar 3-month interest rate 4.000% Danish Kroner 3-month interest rate 5.000% 11. Copenhagen Covered (C). Heidi Hai Jensen is again evaluating the arbitrage prodit potential in the same mar- ket after another change in interest rates (Remember that any time the difference in interest rates does not exactly equal the forward premium, it must be possible to make a CIA profit one way or another.) Arbitrage funds available Spot rate (W/S) 180-day forward rate (W/S) 180 day U.S. dollar interest rate 180-day Japanese yen interest rate $5,000,000 118.60 11780 4.800% 3.400% Arbitrage funds available Spot exchange rate (kr/5) 3-month forward rate (kr/S) U.S. dollar 3-month interest rate Danish kroner 3-month interest rate $5,000,000 6.1720 6.1980 3.000% 6.000% B. Takeshi Kamada-UIA Japan (B).Takeshi Kamada, Credit Suisse (Tokyo), observes that the W spot rate has been holding steady, and that both dollar and yen interest rates have remained relatively fixed over 12. Casper Landsten-CIA (A). Casper Landsten is a for- eign exchange trader for a bank in New York. He has $1 million (or its Swiss franc equivalent) for a short- term money market investment and wonders whether he should invest in U.S. dollars for three months or make a CIA investment in the Swiss franc. He faces the following quotes: Arbitrage funds available $1,000,000 Spot exchange rate (SFr/5) 1.2810 3-month forward rate (SFT/S) 12740 U.S. dollar 3-month interest rate 4.800% Swiss franc 3-month interest rate 3.200% 13. Casper Landsten-UIA (B). Casper Landsten, using the same values and assumptions as in Problem 12, decides to seek the full 4.800% return available in U.S. dollars by not covering his forward dollar receipts- an uncovered interest arbitrage (UIA) transaction. Assess this decision Assumptions London New York Spot exchange rate (S/E) 1.3264 1.3264 1-year Treasury bill rate 3.900% 4.500% Expected inflation rate Unknown 1.250% a. What do the financial markets suggest for inflation in Europe next year? b. Estimate today's 1-year forward exchange rate between the dollar and the euro? 17. Chamonix Chateau Rentals. You are planning a ski vacation to Mt. Blanc in Chamonix, France, one year from now. You are negotiating the rental of a chateau. The chateau's owner wishes to preserve his real income against both inflation and exchange rate changes, and so the present weekly rent of 9,800 (Christmas sea- son) will be adjusted upward or downward for any change in the French cost of living between now and then. You are basing your budgeting on purchasing power parity (PPP). French inflation is expected to average 3.5% for the coming year, while US dollar inflation is expected to be 2.5%. The current spot rate is $1.3620/. What should you budget as the U.S. dollar cost of the 1-week rental? 14. Casper Landsten-Thirty Days Later. One month after the events described in Problems 12 and 13, Casper Landsten once again has $1 million (or its Swiss franc equivalent) to invest for three months. He now faces the following rates. Should he again enter into a covered interest arbitrage (CIA) investment? Arbitrage funds available $1,000,000 Spot exchange rate (SFr/5) 1.3392 3-month forward rate (SFr/S) 1.3286 U.S. dollar 3-month interest rate 4.750% Swiss franc 3-month interest rate 3.625% 15. Statoil of Norway's Arbitrage. Statoil, the national oil company of Norway, is a large, sophisticated, and active participant in both the currency and petro- chemical markets. Although it is a Norwegian com- pany, because it operates within the global oil market, it considers the U.S. dollar, rather than the Norwe- gian krone, as its functional currency. Ari Karlsen is a currency trader for Statoil and has immediate use of either $3 million (or the Norwegian krone equiva lent). He is faced with the following market rates and wonders whether he can make some arbitrage profits in the coming 90 days. Spot exchange rate (S/E) $1.3620 Expected U.S. inflation for coming year 2.500% Expected French ination for coming year 3.500% Current chateau nominal weekly rent (E) 9,800.00 18. East Asiatic Company-Thailand. The East Asiatic Company (EAC), a Danish company with subsidiar- ies throughout Asia, has been funding its Bangkok subsidiary primarily with U.S. dollar debt because of the cost and availability of dollar capital as opposed to Thai baht-denominated (B) debt. The treasurer of EAC-Thailand is considering a 1-year bank loan for $250,000. The current spot rate is B32.06/S, and the dollar based interest is 6.75% for the year period. 1 year loans are 12.00% in baht. a. Assuming expected inflation rates for the coming year of 4.3% and 1.25% in Thailand and the United States, respectively, according to purchase power parity, what would be the effective cost of funds in Thai baht terms? b. If EAC's foreign exchange advisers believe strongly that the Thai government wants to push the value of the baht down against the dollar by 5% over the coming year (to promote its export competitive- ness in dollar markets), what might be the effective cost of funds in baht terms? c. If EAC could borrow Thai baht at 13% per annum, would this be cheaper than either part(a) or part (b)? Arbitrage funds available $3,000,000 Spot exchange rate (Nok/5) 6.0312 3-month forward rate (Nok/5) 6.0186 U.S. dollar 3-month interest rate 5.000% Norwegian Krone 3-month interest rate 4.450% 16. Separated by the Atlantic. Separated by more than 3,000 nautical miles and five time zones, money and foreign exchange markets in both London and New York are very efficient. The following information has been collected from the respective areas: 1. Pulau Penang Island Resort. Theresa Nunn is plan- ning a 30-day vacation on Pulau Penang, Malaysia, one year from now. The present charge for a luxury suite plus meals in Malaysian ringgit (RM) is RM1,045/day. The Malaysian ringgit presently trades at RM3.1350/$. She determines that the doliar cost today for a 30-day stay would be $10,000. The hotel informs her that any increase in its room charges will be limited to any increase in the Malaysian cost of living, Malaysian inflation is expected to be 2.75% per annum, while US. inflation is expected to be 1.25%. a. How many dollars might Theresa expect to need one year hence to pay for her 30-day vacation? b. By what percent will the dollar cost have gone up? Why? the past week. Takeshi wonders if he should try an uncovered interest arbitrage (UIA) and thereby save the cost of forward cover. Many of Takeshi's research associates and their computer models are predict- ing the spot rate to remain close to Y118.00/5 for the coming 180 days Using the same data as in Problem 7 analyze the UIA potential. 9. Copenhagen Covered (A). Heidi Hoi Jensen, a foreign exchange trader at JP Morgan Chase, can invest $5 mil. lion, or the foreign currency equivalent of the bank's short-term funds, in a covered interest arbitrage with Denmark. Using the following quotes, can Heidi make a covered interest arbitrage (CIA) profit? Arbitrage funds available Spot exchange rate (kr/5) 3-month forward rate (kr/S) U.S. dollar 3-month interest rate Danish kroner 3-month interest rate $5,000,000 6.1720 6.1980 3.000% 5.000% 6. Corolla Exports and Pass-Through. Assume that the export price of a Toyota Corolla from Osaka, Japan is 12,150,000. The exchange rate is 1876018. The fore- cast rate of inflation in the United States is 2.2% per year and in Japan it is 0.0% per year. Use this data to answer the following questions on exchange rate pass-through a. What was the export price for the Corolla at the beginning of the year expressed in US dollars? b. Assuming purchasing power parity holds, what should be the exchange rate at the end of the year? c. Assuming 100% exchange rate pass through, what will be the dollar price of a Corolla at the end of the year? d. Assuming 75% exchange rate pass-through, what will be the dollar price of a Corolla at the end of the year? 10. Copenhagen Covered (B). Heidi Hol Jensen is now evaluating the arbitrage profit potential in the same market after interest rates change. Note that any time the difference in interest rates does not exactly equal the forward premium, it must be possible to make a CLA profit one way or another.) 7. Takeshi Kamada--CIA Japan (A). Takeshi Kamada, a foreign exchange trader at Credit Suisse (Tokyo), is exploring covered interest arbitrage possibilities. He wants to invest $5,000,000 or its yen equivalent, in a covered interest arbitrage between US dollars and Jap- anese yen. He faced the following exchange rate and interest rate quotes. Is CIA profit possible? If so, how? Arbitrage funds available $5,000,000 Spot exchange rate (kr/S) 6.1720 3-month forward rate (kr/5) 6.1980 U.S. dollar 3-month interest rate 4.000% Danish Kroner 3-month interest rate 5.000% 11. Copenhagen Covered (C). Heidi Hai Jensen is again evaluating the arbitrage prodit potential in the same mar- ket after another change in interest rates (Remember that any time the difference in interest rates does not exactly equal the forward premium, it must be possible to make a CIA profit one way or another.) Arbitrage funds available Spot rate (W/S) 180-day forward rate (W/S) 180 day U.S. dollar interest rate 180-day Japanese yen interest rate $5,000,000 118.60 11780 4.800% 3.400% Arbitrage funds available Spot exchange rate (kr/5) 3-month forward rate (kr/S) U.S. dollar 3-month interest rate Danish kroner 3-month interest rate $5,000,000 6.1720 6.1980 3.000% 6.000% B. Takeshi Kamada-UIA Japan (B).Takeshi Kamada, Credit Suisse (Tokyo), observes that the W spot rate has been holding steady, and that both dollar and yen interest rates have remained relatively fixed over 12. Casper Landsten-CIA (A). Casper Landsten is a for- eign exchange trader for a bank in New York. He has $1 million (or its Swiss franc equivalent) for a short- term money market investment and wonders whether he should invest in U.S. dollars for three months or make a CIA investment in the Swiss franc. He faces the following quotes: Arbitrage funds available $1,000,000 Spot exchange rate (SFr/5) 1.2810 3-month forward rate (SFT/S) 12740 U.S. dollar 3-month interest rate 4.800% Swiss franc 3-month interest rate 3.200% 13. Casper Landsten-UIA (B). Casper Landsten, using the same values and assumptions as in Problem 12, decides to seek the full 4.800% return available in U.S. dollars by not covering his forward dollar receipts- an uncovered interest arbitrage (UIA) transaction. Assess this decision Assumptions London New York Spot exchange rate (S/E) 1.3264 1.3264 1-year Treasury bill rate 3.900% 4.500% Expected inflation rate Unknown 1.250% a. What do the financial markets suggest for inflation in Europe next year? b. Estimate today's 1-year forward exchange rate between the dollar and the euro? 17. Chamonix Chateau Rentals. You are planning a ski vacation to Mt. Blanc in Chamonix, France, one year from now. You are negotiating the rental of a chateau. The chateau's owner wishes to preserve his real income against both inflation and exchange rate changes, and so the present weekly rent of 9,800 (Christmas sea- son) will be adjusted upward or downward for any change in the French cost of living between now and then. You are basing your budgeting on purchasing power parity (PPP). French inflation is expected to average 3.5% for the coming year, while US dollar inflation is expected to be 2.5%. The current spot rate is $1.3620/. What should you budget as the U.S. dollar cost of the 1-week rental? 14. Casper Landsten-Thirty Days Later. One month after the events described in Problems 12 and 13, Casper Landsten once again has $1 million (or its Swiss franc equivalent) to invest for three months. He now faces the following rates. Should he again enter into a covered interest arbitrage (CIA) investment? Arbitrage funds available $1,000,000 Spot exchange rate (SFr/5) 1.3392 3-month forward rate (SFr/S) 1.3286 U.S. dollar 3-month interest rate 4.750% Swiss franc 3-month interest rate 3.625% 15. Statoil of Norway's Arbitrage. Statoil, the national oil company of Norway, is a large, sophisticated, and active participant in both the currency and petro- chemical markets. Although it is a Norwegian com- pany, because it operates within the global oil market, it considers the U.S. dollar, rather than the Norwe- gian krone, as its functional currency. Ari Karlsen is a currency trader for Statoil and has immediate use of either $3 million (or the Norwegian krone equiva lent). He is faced with the following market rates and wonders whether he can make some arbitrage profits in the coming 90 days. Spot exchange rate (S/E) $1.3620 Expected U.S. inflation for coming year 2.500% Expected French ination for coming year 3.500% Current chateau nominal weekly rent (E) 9,800.00 18. East Asiatic Company-Thailand. The East Asiatic Company (EAC), a Danish company with subsidiar- ies throughout Asia, has been funding its Bangkok subsidiary primarily with U.S. dollar debt because of the cost and availability of dollar capital as opposed to Thai baht-denominated (B) debt. The treasurer of EAC-Thailand is considering a 1-year bank loan for $250,000. The current spot rate is B32.06/S, and the dollar based interest is 6.75% for the year period. 1 year loans are 12.00% in baht. a. Assuming expected inflation rates for the coming year of 4.3% and 1.25% in Thailand and the United States, respectively, according to purchase power parity, what would be the effective cost of funds in Thai baht terms? b. If EAC's foreign exchange advisers believe strongly that the Thai government wants to push the value of the baht down against the dollar by 5% over the coming year (to promote its export competitive- ness in dollar markets), what might be the effective cost of funds in baht terms? c. If EAC could borrow Thai baht at 13% per annum, would this be cheaper than either part(a) or part (b)? Arbitrage funds available $3,000,000 Spot exchange rate (Nok/5) 6.0312 3-month forward rate (Nok/5) 6.0186 U.S. dollar 3-month interest rate 5.000% Norwegian Krone 3-month interest rate 4.450% 16. Separated by the Atlantic. Separated by more than 3,000 nautical miles and five time zones, money and foreign exchange markets in both London and New York are very efficient. The following information has been collected from the respective areas