Foreign Exchange Market

Pages: 14 (5192 words) Published: February 12, 2013
International Financial Management
Comprehensive problem set

1.If one Swiss franc can purchase \$0.71 U.S. dollar, how many Swiss francs can one U.S. dollar buy? And If one U.S. dollar buys 1.0279 euros, how many dollars can you purchase for one euro?
2. Currently, in the spot market \$1 = 106.45 Japanese yen, 1 Japanese yen = 0.00966 euro, and 1 euro = 9.0606 Mexican pesos. What is the exchange rate between the U.S. dollar and the Mexican peso? 3. A currency trader observes the following quotes in the spot market: 122 Japanese yen= 1 U.S. dollar

2.28 Swiss francs= 1 British pound
1 British pound= 1.6542 U.S. dollars
Given this information, what is the exchange rate between the Swiss franc (SF) and the Japanese yen? 4. One year ago, a U.S. investor converted dollars to yen and purchased 100 shares of stock in a Japanese company at a price of 3,150 yen per share. The stock’s total purchase cost was 315,000 yen. At the time of purchase, in the currency market 1 yen equaled \$0.00952. Today, the stock is selling at a price of 3,465 yen per share, and in the currency market \$1 equals 130 yen. The stock does not pay a dividend. If the investor were to sell the stock today and convert the proceeds back to dollars, what would be his realized return on his initial dollar investment from holding the stock? 5. A telephone costs \$50 in the United States. Today, in the currency markets you observe the following exchange rates: 1 U.S. dollar = 1.0279 euros

1 euro = 8.1794 Norwegian krones