International Financial Management Assignment #1

1. List the history of South Koreas exchange rate system changes, including descriptions and discussions of each type.

2. Go to the website of Korean Statistical Information Service (KOSIS.kr).

a) From the various types of statistic, find the balance of payments data (current account, capital account, financial account) and graph the yearly changes (you can also choose quarterly data).

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b) Explain what types of transactions each type of account covers and explain the trends.

c) To this graph, add the USD/KRW rate for each period. Do you find any relation between the exchange rate and the various accounts? Why or why not?

3. As of December 31st, 2020, find the USD/KRW spot exchange rate, the 1-year U.S. treasury yield, and the 1-year Korea Treasury Bond yield.

(fred.stlouisfed.org/series/DEXKOUS, fred.stlouisfed.org/series/DGS1, ecos.bok.or.kr 4.1.1 () ->(1 ))

a) Calculate the 1-year forward rate using the interest rate parity relation.

b) If the actual 1-year forward rate quoted at that time was 1090.0, is there an opportunity for covered interest arbitrage? List all the trades needed to capture arbitrage profits and calculate how much you would make assuming a deal size of $1,000,000.