Sheet1EXERCISE 1: CALCULATING AND USING EXCHANGE RATESCurrencyUS $ EquivalentCurrency per US $Equivalent of 100 US $China (Yuan Renminbi)0.12088.2781827.8146Japan (Yen)0.0083120.3812,038.00Mexico (Peso)0.094010.641,064.28Singapore (Dollar)0.56171.78178.03Taiwan (Dollar)0.0287834.753,474.64Turkey (Lira)0.000000621,612,903.00161,290,300.00U.K. (Pound)1.57340.6463.56Venezuela (Bolivar)0.00061,597.44159,744.00Euro1.07730.9392.82EXERCISE 2: CALCULATING CROSS EXCHANGE RATESUse these exchanges to answer the questions below:COUNTRYCURRENCY PER USD $China - Yuan Renminbi (CNY)8.2871Japan - Yen (JPY)119.0400Argentina - Peso (ARS)2.9750Vietnam - Dong (VND)16,041.0000A Japanese manufacturing firm, Japanohondapokemon, placed a purchase order with Beijing conglomerate,Maydinchina, to procure 10,000 tons of raw materials at a cost of 9,030,200 yuan renminbi. How many yendoes the Japanese firm have to exchange in order to pay the bill in yuan renminbi?A trader at a well-known investment banking firm, Silverman Pouches, has an Argentinian client who is interestedin investing in emerging markets. The trader suggests the purchase of Vietnamese government-issued bonds,currently selling at 1,604,100 Vietnamese dong (VND) per bond. How many Argentine Pesos (ARS) will it cost ifthe client wants to purchase 250 bonds?

EXERCISE 3: CALCULATING CROSS EXCHANGE RATESUS DOLLARVIETNAM VNDONGTAIWAN TDOLLARINDONESIA RUPIAHEGYPT EPOUNDEGYPT5.975400.00037250.15890.0006386-INDONESIA9,356.600.5833248.845-1,565.8530TAIWAN37.600.002344-0.0040196.2925VIETNAM16,041.00-426.62121.71442,684.5065UNITED STATES-0.000062340.026600.00010690.1674EXERCISE 4: CALCULATING BID/ASK SPREADSBIDASKEUROS$ 1.194$1.245YEN$ 0.009245$0.00967What are the bank's bid/ask spreads? How much would you lose if you converted $500 into euros and $500 into yen, and then back into dollars?a.) BID/ASK SPREADSEUROYEN Ask Price1.2450.009670 Less: Bid Price1.1940.009245 Subtotal0.0510.000425 Divided by Ask Price1.2450.009670 Bid/Ask Spread0.0410.043950

b.) HOW MUCH LOSS?EUROYEN USD $ Amount500.00500.00 Multiplied by Rate0.80103.41 Equivalent Amount401.6151,706.31 Multiplied by Rate1.190.01 Equivalent USD $479.52478.02 USD $ Amount500.00500.00 Loss on Conversion(20.48)(21.98)

EXERCISE 5: CURRENCY APPRECIATIONS AND DEPRECIATIONSDATESEXCHANGE RATECURRENCYAPPRECIATEDDEPRECIATIED4/24/030.91130 EUR/USDEURYES4/28/030.90630 EUR/USD6/17/9723.2 BHT/USDBHTYES1/13/9855.8 BHT/USD4/25/021.6430 CHF/USDCHFYES4/26/020.6140 USD/CHF6/26/020.0008324 USD/KRWKRWYES2/18/030.0008286 USD/KRW1/30/991.0038 ARS/USDUSDYES2/5/011.00050 USD/ARS1/30/002.3442 CAD/GBPCADYES9/20/002.0927 CAD/GBP12/12/020.01629 INR/IQDINRYES2/2/0368.0289 IQD/INR12/27/021.776 AUD/USDUSDYES12/28/021.7831 AUD/USDAUD Australian DollarEUR EuroUSD U.S. DollarARS Argentine PesoGBP British PoundBHT Thai BahtINR Indian RupeeCAD Canadian DollarIQR Iraqi DinarCHF Swiss FrancKRW Korean WonEXERCISE 6: MEASURING CURRENCY FLUCTUATIONSIf the Mexican Peso depreciates 50% against the U.S. Dollar, how much would the peso have to appreciateto get back to its original level?Let exchange rate be: 1USD = 10MXNSo, if MXN decreased by 50%, then rate: 1USD = 20MXNTo go back to its original level, MXN must appreciate by 50%EXERCISE 7: MEASURING CURRENCY FLUCTUATIONSThe Brazilian Real (BRL) exchange rate moved from 3.2020 BRL/USD to 3.1606 BRL/USD over two days.Calculate the Real's Percentage Change and note whether it appreciated or depreciated.Original Rate3.202Less: Changed Rate3.1606Amount Changed0.0414Divided by Original Rate3.2020.0129294191Multiplied by 100%100%Depreciation in USD1.29%

Original Rate0.3123Less: Changed Rate0.3164Amount Changed-0.0041Divided by Original Rate0.31230.0131Multiplied by 100%100%Appreciation in BRL1.31%

EXERCISE 8: CALCULATING ACTUAL AND IMPLIED PPP EXCHANGE RATESThe Economist Big Mac IndexBIG MAC PRICESIMPLIED PPP OF THEActual Dollar ExchangeUnder(-)/Over(+) valuationIN LOCAL CURRENCYIN DOLLARSDOLLARRates. April 22, 2003against the dollar %UNITED STATES2.712.71---AUSTRALIA3.001.861.111.61-31.06BRAZIL4.551.481.683.07-45.00CHINA9.901.203.658.28-56.00DENMARK27.754.1010.246.7851.00EGYPT8.001.352.955.93-50.00HONG KONG11.501.474.247.80-46.00MALAYSIA5.041.331.863.80-51.00RUSSIA41.001.3215.1031.10-51.45SOUTH KOREA3300.002.711217.711220.00-SWITZERLAND6.304.592.321.3769.03EXERCISE 8: CALCULATING THE COST OF A FORWARD CONTRACTA U.S. Multinational, Hoola Hoopa, Inc., hired a Canadian IT consulting firm to upgrade its internal network.In 6 months when the contract is over, Hoola Hoopa will need 1.5 million Canadian dollars to pay theconsultants. The company needs to decide whether or not it should enter into a forward contract to hedge itsexchange rate risk. Fill in the answers below using the US $ Equivalent rates listed in the table below.U.S. $ EQUIVALENTCURRENCY PER U.S. $COUNTRYMONFRIMONFRICanada (Dollar)0.68790.68791.45371.4537 1-month forward0.68680.68691.45601.4558 3-months forward0.68440.68451.46111.4609 6-months forward0.68030.68041.46991.4697Switzerland (Franc)0.71970.71791.38951.3930 1-month forward0.72030.71831.38831.3922 3-months forward0.72150.71921.38601.3904 6-months forward0.72320.72131.38271.3864U.K. (Pound)1.57341.57150.63560.6363 1-month forward1.57031.57830.63680.6336 3-months forward1.56441.56240.63920.6400 6-months forward1.55551.55360.64290.6437a.) Canadian Dollar Spot Rate0.6879

b.) Canadian Dollar 6-Months Forward Rate0.6803

c. What it would cost Hoola Hoopa if the company were to purchase the Canadian Dollars spot on 04/15/2003?Amount of CAD1,500,000.00Multiplied by Spot Rate0.6879Cost to Hoola Hoopa1,031,850.00

d.) What it would cost Hoola Hoopa if it hedged with a forward contract on 04/15/2003 to purchase 1.5 million Canadian Dollars 6 months later on 10/15/2003?Amount of CAD1,500,000.00Multiplied by Forward Rate0.6803Cost to Hoola Hoopa1,020,450.00

Compare the cost of the forward contract, or the hedged position, with the cost of buying the Canadian Dollarson the spot market on October 15, 2003. Fill in the table below to show the cost of buying C$1.5 million at different spot rates, and then calculate Hoola Hoopa's potential gains or losses from hedging with a futurescontractSpot Rate on 10/15/2003Unhedged PositionHedged PositionPotential Gains/Losses inU.S.$ from Hedge0.6521978,150.001,020,450.00(42,300.00)0.67001,005,000.001,020,450.00(15,450.00)0.68031,020,450.001,020,450.000.00.68501,027,500.001,020,450.007,050.000.69001,035,000.001,020,450.0014,550.00

CNY 9,030,2001USD $ 1CNY 8.2871JPY 119.04USD $ 1XX=JPY 129,714,255.70VND 1,604,100 x 2501USD $ 1VND 16,041ARS 2.975USD $ 1XX=ARS 74,375.00Amount ChangeOriginal Rate0.50.05=X=10100X100

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