Multinational Finance, EIE 2005/06, problem set - I

Question 1
Initial exchange rates for Malaysian ringget and Czech koruna against U.S. dollar were MYR 2.5400/USD and
CZK 236.2100/USD, accordingly. You know that ringget depreciated by 20% and koruna appreciated by 5%. Calculate
exchange rates after the changes in value.

Question 2

a. Given the quotations for Norwegian kroner and Brazilian real, determine kroner bid and ask quotes for real.

NOK 6.0000-25/USD

BRL 2.0000-15/USD

b. Given the quotations for Swiss franc and euro, calculate franc bid and ask quotes for euro.

USD 0.7839-45/CHF

USD 1.2177-91/EUR

c. Given the quotations for Norwegian kroner and Japanese yen, determine kroner bid and ask quotes for yen.

NOK 1.5400-05/USD

USD 1.2650-60/JPN

Question 3
The Australian dollar is quoted against the U. S. dollar as follows:

USD/AUD

Spot

0.7152

1mth

0.7144

3mth

0.7128

6mth

0.7107

12mth

0.7152

a. Calculate the 90-day forward premium on AUD.
b. Calculate the 180-day forward premium on AUD.
c. Calculate the 270-day forward exchange rate on AUD. Assume that the 270-day deposit rates are 3.50%p.a. for

U.S. dollar and 4.25%p.a. for AUD.

Question 4
You are given the following quotations:
London:

CHF

3.4400/JPN

New York:

CHF 486.00/USD

Tokyo:

JPN 142.00/USD

a. Decide if there is an opportunity for intermarket arbitrage? If so, explain why.
b. Suppose that you have USD 1,000,000. Compute your profit from intermarket arbitrage.