International Finance: Topic 1 --> The Determination of Exchange Rates (Chapter 2)

Individual Assignment 1 International Finance 3551 (Spring 2017 - 002/003/004) (Instructor: Francesca Brusa) Submission: Thursday, February 9 Answers must be clearly legible (typed or handwritten) and include intermediate steps. This assignment is cumulative, questions will be added twice per week until Friday, February 3. Notation: : Japanese yen $: U.S. dollar MXN: Mexican peso U.S. dollar value (or price) of the yen: 1=$e (as in the textbook) Topic 1: The Determination of Exchange Rates (Chapter 2) 1.1) Between 1994 and 1995, the Mexican peso moved from $3.38 to $6.44. a) How many dollars did the Mexican peso buy in 1994? And in 1995? b) How many Mexican pesos did the U.S. dollar buy in 1994? And in 1995? c) Compute the 1994-1995 percentage change in the value of the Mexican peso relative to the U.S. dollar ($/MXN). d) Given your answer in c), did the Mexican peso appreciate or depreciate against the U.S. dollar over the 1994-1995 period? e) Given your answer in d), did the U.S. dollar appreciate or depreciate against the Mexican peso over the 1994-1995 period? f) Compute the 1994-1995 percentage change in the value of the U.S. dollar relative to the Mexican peso (MXN/$). 1.2) On June 18, 2007, one U.S. dollar bought 124.09. On June 18, 2012, one U.S. dollar was worth 80.52. By June 18, 2015, the U.S. dollar moved to 123.53. a) Did the yen appreciate or depreciate against the U.S. dollar between June 2007 and June 2012? Did such trend continue between June 2012 and June 2015? b) How many U.S. dollars did one yen buy on June 18, 2007? And on June 18, 2012? What was the U.S. dollar value of the yen on June 18, 2015? c) By what percentage has the yen appreciated/depreciated against the U.S. dollar between June 2007 and June 2012? And between June 2012 and June 2015? d) By what percentage has the U.S. dollar appreciated/depreciated against the yen between June 2007 and June 2012? And between June 2012 and June 2015? e) Do your answers to questions d) and e) change if you consider the entire sample period (2007-2015)? 1.3) The Brazilian real devalues by 40% against the U.S. dollar. By how much does the U.S. dollar appreciate against the Brazilian real