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61.
The camera you want to buy costs $230 in the U.S. How much will the
identical camera cost in Canada if the exchange rate is C$1 = $0.8262?
Assume absolute purchasing power parity exists.
62.
A new coat costs 3,900 Russian rubles. How much will the identical coat
cost in Euros if absolute purchasing power parity exists and the following
exchange rates apply?
63.
Assume that $1 can buy you either ¥95.42 or £0.6211. If a TV in London
costs £990, what will that identical TV cost in Tokyo if absolute purchasing
power parity exists?
64.
In the spot market, $1 is currently equal to A$1.4910. Assume the expected
inflation rate in Australia is 3.5 percent and in the U.S. 4.0 percent. What is
the expected exchange rate one year from now if relative purchasing power
parity exists?
65.
In the spot market, $1 is currently equal to £0.6211. Assume the expected
inflation rate in the U.K. is 4.2 percent while it is 3.1 percent in the U.S.
What is the expected exchange rate one year from now if relative
purchasing power parity exists?
66.
In the spot market, $1 is currently equal to £0.6211. Assume the expected
inflation rate in the U.K. is 2.6 percent while it is 4.3 percent in the U.S.
What is the expected exchange rate four years from now if relative
purchasing power parity exists?
67.
Assume the current spot rate is C$1.2103 and the one-year forward rate is
C$1.1925. The nominal risk-free rate in Canada is 3 percent while it is 4
percent in the U.S. Using covered interest arbitrage you can earn an extra
_____ profit over that which you would earn if you invested $1 in the U.S.
68.
Assume the current spot rate is C$1.1875 and the one-year forward rate is
C$1.1724. The nominal risk-free rate in Canada is 4 percent while it is 3
percent in the U.S. Using covered interest arbitrage you can earn an extra
_____ profit over that which you would earn if you invested $1 in the U.S.
69.
Assume the spot rate for the Japanese yen currently is ¥99.31 per $1 and
the one-year forward rate is ¥97.62 per $1. A risk-free asset in Japan is
currently earning 2.5 percent. If interest rate parity holds, approximately
what rate can you earn on a one-year risk-free U.S. security?
70.
Assume the spot rate for the British pound currently is £0.6211 per $1. Also
assume the one-year forward rate is £0.6347 per $1. A risk-free asset in the
U.S. is currently earning 3.4 percent. If interest rate parity holds, what rate
can you earn on a one-year risk-free British security?
71.
A risk-free asset in the U.S. is currently yielding 4 percent while a Canadian
risk-free asset is yielding 2 percent. Assume the current spot rate is
C$1.2103. What is the approximate three-year forward rate if interest rate
parity holds?
72.
Assume the spot rate on the Canadian dollar is C$1.1847. The risk-free
nominal rate in the U.S. is 5 percent while it is only 4 percent in Canada.
What one-year forward rate will create interest rate parity?
73.
Assume the spot rate on the Canadian dollar is C$0.9872. The risk-free
nominal rate in the U.S. is 5.4 percent while it is only 4.2 percent in Canada.
Which one of the following four-year forward rates best establishes the
approximate interest rate parity condition?
74.
You are considering a project in Poland which has an initial cost of
275,000PLN. The project is expected to return a one-time payment of
390,000PLN four years from now. The risk-free rate of return is 4.5 percent
in the U.S. and 3 percent in Poland. The inflation rate is 4 percent in the
U.S. and 2 percent in Poland. Currently, you can buy 277PLN for 100USD.
How much will the payment of 390,000PLN be worth in U.S. dollars four
years from now?
75.
You are expecting a payment of 450,000PLN three years from now. The
risk-free rate of return is 3 percent in the U.S. and 4 percent in Poland. The
inflation rate is 2.5percent in the U.S. and 3 percent in Poland. Currently,
you can buy 277PLN for 100USD. How much will the payment three years
from now be worth in U.S. dollars?
76.
You are expecting a payment of C$100,000 four years from now. The risk-
free rate of return is 3.8 percent in the U.S. and 4.1 percent in Canada. The
inflation rate is 2 percent in the U.S. and 3 percent in Canada. Suppose the
current exchange rate is C$1 = $0.8273. How much will the payment four
years from now be worth in U.S. dollars?
77.
Suppose the current spot rate for the Norwegian kroner is $1 = NKr6.6869.
The expected inflation rate in Norway is 6 percent and in the U.S. it is 3.1
percent. A risk-free asset in the U.S. is yielding 4 percent. What risk-free
rate of return should you expect on a Norwegian security?
78.
Suppose the current spot rate for the Norwegian kroner is $1 = NKr6.7119.
The expected inflation rate in Norway is 4 percent and in the U.S. 3 percent.
A risk-free asset in the U.S. is yielding 4.5 percent. What approximate real
rate of return should you expect on a risk-free Norwegian security?
79.
The expected inflation rate in Finland is 2.8 percent while it is 3.2 percent in
the U.S. A risk-free asset in the U.S. is yielding 4.9 percent. What
approximate real rate of return should you expect on a risk-free Finnish
security?
80.
You want to invest in a project in Canada. The project has an initial cost of
C$2.2 million and is expected to produce cash inflows of C$900,000 a year
for 3 years. The project will be worthless after the first 3 years. The
expected inflation rate in Canada is 4 percent while it is only 3 percent in
the U.S. The applicable interest rate for the project in Canada is 13 percent.
The current spot rate is C$1 = $0.8158. What is the net present value of this
project in Canadian dollars?
