Assumptions Value
Euro funds for expenses in Japan € 17,000.00
Average exchange rate for the month (JPY = 1.00 Euro):
January ¥125.18
February ¥126.17
March ¥124.38
April ¥124.95
May ¥121.76
June ¥122.71
Answers
Japanese Yen proceeds from exchange by month:
Euro x spot exchange rate (JPY = 1.00 Euro)
January ¥2,128,060
February ¥2,144,890
March ¥2,114,460
April ¥2,124,150
Problem 1.1 Rugby World Cup and the Japanese Yen.
Steven McGregor had planned his trip to the Rugby World Cup in Japan for almost a year. He had
budgeted—saved—€17,000 for expenses while in Japan. But he had postponed exchanging the euros for
Japanese yen (JPY or ¥)—until the very last minute on September 17th, doing it at Dublin Airport at JPY
Looks like Steven messed up by waiting to exchange the currency on his flight out to Japan. The airport
spot rate turned out to be the worst for Steven as the Japanese yen had appreciated versus the Euro over the
year. The best exchange rate was that in February of 2019. But then again, Steven did not have a crystal ball
Assumptions Value
Price of 100 Pokecoins in Mexico City (Mexican pesos, MXN or Ps) MXN 17
Answers Toys
a. What are the US dollar proceeds of the sale in Mexican pesos?
Proceeds in Mexican pesos (MXN) / Spot exchange rate (MXN/$) $0.9444
Problem 1.2 Peso, Dollar, Yen & Pokémon-Go
Crystal Gomez, who lives in Mexico City (as noted in the Global Finance in Practice 1.2 in the chapter),
bought 100 Pokécoins for 17 Mexican pesos (Ps or MXN). Nintendo of Japan, one of the part owners of
Spot rate on the GTQ/EUR: GTQ 10.5799/EUR
Spot rate on the EUR/BRL: EUR0.4462/BRL
Assumptions Values
Amount of Brazlian reais from parents 4,500.00
Spot rate (BRL/EUR) 10.5799
Spot rate (EUR/GTQ) 0.4462
a. What is the BRL/GTQ cross rate?
Cross rate (BRL/GTQ) 4.72
BRL/GTQ = BRL/EUR x EUR/GTQ
Problem 1.2 Isaac Díez of Brazil
Isaac Díez Peris lives in Rio de Janeiro, Brazil. While attending school in Spain he
meets Juan Carlos Cordero from Guatemala. Over the summer holiday Isaac decides to
visit Juan Carlos in Guatemala City for a couple of weeks. Isaac’s parents give him
Assumptions Values
Beginning your trip with euros 15,000.00
a) What is the Russian ruble/euro cross rate?
Cross rate (RUB/EUR) 63.30
RUB/EUR = RUB/USD x USD/EUR
Problem 1.3 Munich to Moscow
On your post-graduation celebratory trip you decide to travel from Munich,
Germany to Moscow, Russia. You leave Munich with 15,000 euros (EUR) in your
wallet. Wanting to exchange all of these for Russian rubles (RUB), you obtain the
following quotes:
a. What is the Russian ruble/euro cross rate?
b. How many Russian rubles will you obtain for your euros?
Spot rate on the rubles/dollar cross rate RUB 30.96/USD
Spot rate on the yen/dollar cross rate JPY84.02/USD
Assumptions Values
Beginning your trip with rubles 450,000.00
Spot rate (RUB = 1.00 USD) 30.96
Spot rate (JPY = 1.00 USD) 84.02
b) How many Japanese yen will you obtain for your Russianrubles?
Converting your Rubles into yen 1,221,177
Problem 1.5 Moscow to Tokyo
After spending a week in Moscow you get an email from your friend in Japan. He
can get you a really good deal on a plane ticket and wants you to meet him in
Tokyo next week to continue your post-graduation celebratory trip. You have
Assumptions Values
Buy a South African Rand in Paris for (ZAR/€) € 0.0610
Which is equivalent, the reciprocal (€/$) ZAR 16.3934
Problem 1.6 Mark Du Plessis in Johannesburg, South Africa.
Mark Du Plessis lives in Johannesburg, South Africa. He can buy a euro for R16.3700 (South African
rand). At the same time, Richard Nolan, living in Paris, can buy a South African rand for €0.0631. What is
the foreign exchange rate between the South African rand and the euro?
Assumptions Rate Values
Spot rate, December 20, 1994 (Ps/$) S1 3.30
Spot rate, December 21, 1994 (Ps/$) S2 5.50
The peso since that time, and we have now weathered two additional six-year dates (2000 and
2006), has been remarkable stable against all major currencies, including the dollar.
Problem 1.7 Mexico’s Cada Seis Años
Mexico was famous – or infamous – for many years in having two things every six years (cada
seis años in Spanish): a presidential election and a currency devaluation. This was the case in
Country ISO Currency Salary Signing Bonus
Converting Each Salary and Signing Bonus into US Dollars:
Country ISO Currency Salary Signing Bonus Currency = $1.00
Salary (€) Bonus (€) Total (€)
Mozambique MOZ metical (MT) 3,000,000 850,000 68.5900 $43,738 $12,392 € 56,130.63
Problem 1.8 Krisianto’s Competing Job Offers.
Krisianto, after an intensive post-graduation job search, has received job offers from three multinational companies. Each position is based in a different country—Mozambique,
Uzbekistan, and Singapore—and offers a different starting salary and a different signing bonus in a different currency. Krisianto wants to compare all the compensation packages in a
common currency, the euro. Use the data below to determine which offer represents the greatest initial euro compensation package.
After completing the table below, answer the following questions.
a. Which city in the table is truly the cheapest date?
b. Which city in the table is the most expensive-cheap date?
Cheap Date in Exchange Exchange Rate Cheap Date in Relative
Country City Local Currency Rate Quote 7 April 2014 In USD to NYC
Australia Sydney AUD 111.96 USD = 1 AUD 0.9290 104.01 112%
Brazil Rio de Janeiro BRL 135.43 USD = 1 BRL 0.4363 59.09 63%
Canada Ottawa CAD 78.33 USD = 1 CAD 0.9106 71.33 77%
China Shanghai CNY 373.87 USD = 1 CNY 0.1619 60.53 65%
India Mumbai INR 1,379.64 USD = 1 INR 0.0167 23.04 25%
Indonesia Jakarta IDR 314,700 USD = 1 IDR 0.0001 31.47 34%
Japan Tokyo JPY 10,269.07 USD = 1 JPY 0.0097 99.61 107%
Malaysia Kuala Lumpur MYR 117.85 USD = 1 MYR 0.3048 35.92 39%
Mexico Mexico City MXN 423.93 USD = 1 MXN 0.0769 32.60 35%
New Zealand Auckland NZD 111.52 USD = 1 NZD 0.8595 95.85 103%
Phillipines Manila PHP 1,182.88 USD = 1 PHP 0.0222 26.26 28%
Russia Moscow RUB 2,451.24 USD = 1 RUB 0.0283 69.37 74%
Singapore Singapore SGD 77.89 USD = 1 SGD 0.7939 61.84 66%
a. The truly cheapest cheap date could be had in Mumbai, India, at only 25% of what it costs in New York City.
b. The most expensive-cheap date would be London at 130% of the cost of New York City.
Problem 1.9 Comparing Cheap Dates Around the World
Comparison of prices or costs across different country and currency environments requires the translation of the local currency into a
Source: Data drawn from The Random Walk, Mapping the World’s Prices 2014 , Deutsche Bank Research, 09 May 2014, Figures 30 and 32, with author
calculations. ‘Relative to NYC’ is calculated as = Cheap Date in USD/93.20.
Note: The cheap date combines the local currency cost of a cab ride for two, two McDonald’s hamburgers, two soft drinks, two movie tickets, and two
beers. In 2013 Deutsche Bank had included sending a bouquet of roses in the date, but did not include that in the 2014 index, making the two years not
directly comparable.
Japanese Britih European Chinese Russian United States
Net Income Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary
The average exchange rate for each year, by currency pairs, was the following. Use this data to answer the following questions.
Exchange Rate JPY = 1 USD USD = 1 GBP USD = 1 EUR CNY = 1 USD RUB = 1 USD USD
2013 97.57 1.5646 1.3286 6.1484 31.86 1.0000
2014 105.88 1.6473 1.3288 6.1612 38.62 1.0000
a. What was Blundell Biotech’s consolidated profits in U.S. dollars in 2013 and 2014?
c. Using the results of the ‘constant currency analysis in part b, is it possible to separate Blundell‘s growth in earnings between local
currency earnings and foreign exchange rate impacts on a consolidated basis?
b. If the exchange rates for 2013 are used for both years, earnings from individual subsidiaries and consolidation appear as follows.
Japanese Britih European Chinese Russian United States Consolidated
Net Income (USD) Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Earnings
2013 USD 15.37 USD 156.46 USD 271.03 USD 27.32 USD 3.89 USD 360.00 USD 834.08
2014 USD 14.96 USD 166.47 USD 276.35 USD 31.55 USD 3.64 USD 382.00 USD 874.98
Change (USD 0.41) USD 10.01 USD 5.31 USD 4.23 (USD 0.25) USD 22.00 USD 40.90
Percent change -2.7% 6.4% 2.0% 15.5% -6.5% 6.1% 4.90%
On a constant currency basis, all subsidiaries showed growth in profits except for the Japanese and Russian subsidiaries. Fortunately for Blundell,
neither of those subsidiaries is a major contributor to total profits.
c. Blundell Biotech’s consolidated earnings grew 5.7%. Since 4.9% of that was on an actual results basis (using constant currency assumption), the
exchange rate-based change in earnings can be solved for:
Blundell Biotech is a U.S.-based biotechnology company with operations and earnings in a number of foreign countries. The
company’s profits by subsidiary, in local currency (in millions), are shown in the following table for 2013 and 2014.
Problem 1.10 Blundell Biotech
a. Consolidated profits or earnings is found by consolidating the converted profits in each foreign currency to U.S. dollars for that period. (This is
simplified. Actual accounting practices would require the additional netting of any intra-company transactions resulting to eliminate any double-
counting of profits.)
Fixed Rmb Pricing of the PT350 Plasma Cutting Torch
Cost Margin Price Margin Average Rate Price Percent Chg
Year (Rmb) (Rmb) (Rmb) (percent) (Rmb/US$) (US$) in US$ Price
2007 16,000 2,000 18,000 11.1% 7.61 2,365 —
2008 15,400 2,600 18,000 14.4% 6.95 2,590 9.50%
2009 14,800 3,200 18,000 17.8% 6.83 2,635 1.76%
Problem 1.11 Peng Plasma Pricing
Peng Plasma is a privately held Chinese business. It specializes in the manufacture of plasma cutting torches. Over the past eight
years it has held the Chinese renminbi price of the PT350 cutting torch fixed at Rmb 18,000 per unit. Over that same period it has
worked to reduce costs per unit, but has struggled of late due to higher input costs. Over that same period the renminbi has
continued to be revalued against the U.S. dollar by the Chinese government. After completing the table – assuming the same
price in renminbi for all years – answer the following questions.