International Finance, Chapter 2, Exercise Solutions
Essay Preview: International Finance, Chapter 2, Exercise Solutions
Report this essay
Problems1. In Brussels: €/$ – €0.82; solution: $/€=1/0.82=$1.2195 In New York: $/€=$1.22; solution: €/$=1/1.22=€0.81972. Value of Mexican Peso: Peso/$1 = 3.2 Peso/$2 = 5.5Solution: Percentage change = (3.2-5.5)/5.5*100% = -41.8% As the figure is negative, it means, Mexican Peso devalued against dollar by 41.8 %;3. One ounce of gold – $20.67 One ounce of gold – FF310.00Solution: FF/$ = 310.00/20.67 = FF15 or $/FF = 20.67/310.00 = $0.06674. Price of one ounce of gold – $20.67 or £4.2474 If the dollar price had been $38 per ounce, what would be $/£?Solution: Old $/£ = 20.67/4.2474 = $4.867 New $/£ = 38/4.2474 = $8.955. Spot rate of Mexican pesos = Ps10.74/$ Company buys Ps350,000Solution: Company must pay – 350,000/10.74= $32,588 6. HK$/$ = 7.80; Yuan/$1 = 8.28; Yuan/$2 = 8.11Solution: HK$/Yuan1 = 7.80/8.28 = HK$ 0.942 HK$/Yuan2 = 7.80/8.11 = HK$ 0.962
8. Price of Porsche Panamera – €120,000; Margin earned – 20%. a) Spot rate – $1.44/€; Dollar Price of Panamera – ?Solution: Price of Panamera in US dollars = 120,000*1.44 = $172,800 b) If price in US dollars – $158,000 and $/€ = 1.42; Margin – ?Solution: Euro equivalent of $158,000 = 158,000/1.42 = €111,268 Margin = (111,268-120,000*0.8)*100/111,268 = 13.72%9. Price of Porsche Panamera – €120,000; Margin earned – 20%; Spot rate – $1.625/€; US $ price of Panamera – $158,000. Profit margin of each car sold in US – ?Solution: Euro value of $158,000 = 158,000/1.625 = €97,231 Margin (of each car sold in US) = (97,231-120,000*0.8)*100/97,231 = 1.266%10. Price of platform – ¥1,650,000; ¥/£1 = ¥197; ¥/£2 = ¥190; Change of price in £ – ?Solution: Price1 in £ = 1,650,000/197 = £8375.63 Price2 in £ = 1,650,000/190 = £8684.21 Price increased by (8684.21-8375.63)/ 8375.63 = 3.68%11. Price in Indian rupees – Rps12,500; Price in Brazilian reals – R$825; After appreciation of reals, rate – Rps17.5/R$; New rupees price -?Solution: Old Rps/R$ = 12,500/825 = Rps15.152 Appreciation = (17.5-15.152)*100/15.152 = 15.5% New price in rupees = 12,500*1.155 = Rps14,437.5DatePound spot rateEuro spot rateJuly 17£0.5702/$€0.8304/$July 18£0.5712/$€0.8293/$July 19£0.5756/$€0.8340/$12. US dollar price – $170Pound priceEuro price170*0.5702 = £96.934170*0.8304 = €141.168170*0.5712 = £97.104170*0.8293 = €140.981170*0.5756 = £97.852170*0.8340 = €141.78 Solution: