QUESTION ! Comparison of prices or costs across different country and currency environments requires translation of the local currency into a single common currency. This is most meaningful when the comparison is for the identical product or services across countries Country City Cheap Date I Exchange rate Exchange USD Price local currency Quote rate 7 Dec 2019 Australia Sydney AUD 111.96 USDI AUD 0.9290 114.01 Malaysia Kuala Lumpur MYR 117.85 USD MYR 0.3048 (A) Japan Tokyo JPY 10.269.07 USD 1 JPY 0.0097 99.61 China Shanghai CNY 373. 87 USD - 1 CNY 0.1619 a) Fill up (A) and (B) [2 marks b) Assume a simple world in which the Malaysia exports beef burger to Australia. If the Malaysia imposes large tariffs on the beef burger to Australian importers, explain the likely impact on price of imported Malaysia's beef burger and Australia's demand of Malaysia's beef burger [2 marks] c) What is the value of Australia dollar in Chinese yuan? [2 marks ) Why do firms become multinational? [2 marks e) Deutsche Bank expects that Malaysian ringgit will appreciate against that the dollar from its spot rate of S 0.1619 to $ 0.1800 in a year. The following interbank lending and borrowing rates exist Currency Lending rate Borrowing rate Dollar 6.0% Malaysian ringgit 7.0% 7.39 Assume that Deutsche Bank has borrowing capacity of either $ 100,000 or MYR 500,000 in the interbank market depending on which currency it wants to borrow. How could Deutsche Bank att to capitalize on its expectations without using deposited funds Describe strategy Deutsche Bank can speculate make profit from the expectation appreciation Malaysian ringgit and estimate the profits in dollar that could be generated from this strategy [4 marks) Andrew expects that Australian AUD will be appreciate in one year from $0.9290 to $1.2100 and if a bank allows him to borrow $10,000 at 6% interest rate for one year. How can Andrew speculate of this appreciation and what are the amount of profits (if any) from this speculation? [3 marks QUESTION ! Comparison of prices or costs across different country and currency environments requires translation of the local currency into a single common currency. This is most meaningful when the comparison is for the identical product or services across countries Country City Cheap Date I Exchange rate Exchange USD Price local currency Quote rate 7 Dec 2019 Australia Sydney AUD 111.96 USDI AUD 0.9290 114.01 Malaysia Kuala Lumpur MYR 117.85 USD MYR 0.3048 (A) Japan Tokyo JPY 10.269.07 USD 1 JPY 0.0097 99.61 China Shanghai CNY 373. 87 USD - 1 CNY 0.1619 a) Fill up (A) and (B) [2 marks b) Assume a simple world in which the Malaysia exports beef burger to Australia. If the Malaysia imposes large tariffs on the beef burger to Australian importers, explain the likely impact on price of imported Malaysia's beef burger and Australia's demand of Malaysia's beef burger [2 marks] c) What is the value of Australia dollar in Chinese yuan? [2 marks ) Why do firms become multinational? [2 marks e) Deutsche Bank expects that Malaysian ringgit will appreciate against that the dollar from its spot rate of S 0.1619 to $ 0.1800 in a year. The following interbank lending and borrowing rates exist Currency Lending rate Borrowing rate Dollar 6.0% Malaysian ringgit 7.0% 7.39 Assume that Deutsche Bank has borrowing capacity of either $ 100,000 or MYR 500,000 in the interbank market depending on which currency it wants to borrow. How could Deutsche Bank att to capitalize on its expectations without using deposited funds Describe strategy Deutsche Bank can speculate make profit from the expectation appreciation Malaysian ringgit and estimate the profits in dollar that could be generated from this strategy [4 marks) Andrew expects that Australian AUD will be appreciate in one year from $0.9290 to $1.2100 and if a bank allows him to borrow $10,000 at 6% interest rate for one year. How can Andrew speculate of this appreciation and what are the amount of profits (if any) from this speculation? [3 marks
