Problem $7$

At the beginning of the year the exchange rate between Japanese yen and Euro under the indirect

quotation equaled $\frac{}{}=134\mathrm{.}52.$ Inflation levels in Japan and France were $3\mathrm{.}2\%$ and $2\mathrm{.}8\%$

respectively. What should the exchange rate between these two currencies at the year$-$end be

so that the purchasing power parity would hold?

Problem $8$

Assume an MNE exporting medications from Israel to the USA. This transaction implies that a

payment of $200,000$ USD will be received in $3$ months. Considering this the MNE faces the risk of

Israeli new shekel appreciation against the USD. Construct the money market hedge that is to

cover this type of risk and explain each transaction of this hedge, given the following inputs:

$($ ILS $\frac{?}{?}$ USD$)$