Purchase Solution

# Converting foreign currency rates

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Use the information in Figure 21.1 to answer the following questions:

a. £320 is worth \$ . (Round your answer to 2 decimal places. (e.g., 32.16))

b. £320 is worth SF . Therefore, you would rather have . (Round your answer to 4 decimal places. (e.g., 32.1616))

c. The cross-rate for Swiss francs in terms of British pounds is SF/£ . The cross-rate for British pounds in terms of Swiss francs is £/SF . (Round your answers to 4 decimal places. (e.g., 32.1616))

Use the information in Figure 21.1 to answer the following questions:

a. If you have \$265, you can get euros. (Round your answer to 2 decimal places. (e.g., 32.16))

b. One euro is worth \$ . (Round your answer to 4 decimal places. (e.g., 32.1616))

c. If you have 13 million euros, you have \$ . (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.)

d. The Singapore dollar is worth that the New Zealand dollar.

e. The Mexican peso is worth than the Chilean peso.

f. You can get Mexico pesos for a Euro. This type of rate is called . (Round your answer to 4 decimal places. (e.g., 32.1616))

g. Which currency per dollar is the most valuable and which is the least valuable? (Round your most valuable to 4 decimal places and least valuable to 6 decimal places. (e.g., 32.1616))

Most valuable: = \$

Least valuable: = \$

Suppose the current exchange rate for the Polish zloty is Z 2.77. The expected exchange rate in three years is Z 2.83. What is the difference in the annual inflation rates for the United States and Poland over this period? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Difference in annual inflation rates %

Suppose the spot and three-month forward rates for the yen are ¥79.20 and ¥78.64, respectively.

b. What would you estimate is the difference between the annual inflation rates of the United States and Japan? (Negative amount should be indicated by a minus sign. Round your answer to 1 decimal place. (e.g., 32.16))

Annual inflation rates %

Suppose the spot exchange rate for the Canadian dollar is Can\$1.07 and the six-month forward rate is Can\$1.09.

a. Which is worth more, a U.S. dollar or a Canadian dollar?

U.S. dollar

b. Assuming absolute PPP holds, what is the cost in the United States of an Elkhead beer if the price in Canada is Can\$2.60? (Round your answer to 3 decimal places. (e.g., 32.161))

Cost in U.S. dollars \$

c. Is the U.S. dollar selling at a premium or a discount relative to the Canadian dollar?

Discount

d. Which currency is expected to appreciate in value?

Canandian dollar

U.S. dollar

e. Which country do you think has higher interest rates - the United States or Canada?

United States

##### Solution Summary

The expert converts foreign current rates. The price that they exchange are given.

##### Solution Preview

Solution

a. 0.7384* £320 = \$235.136
b. SF 189.99, 100 British Pounds than Swiss Francs
c. 1.4939, 0.6695

a. \$256*1.3609 = 348.3904
b. 1 euro ...

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