Questions from Financial Markets

Q: The current exchange rate is 0.75 euro per dollar,

The current exchange rate is 0.75 euro per dollar, but you believe the dollar will decline to 0.67 euro per dollar. If a euro-denominated bond is yielding 2%, what return do you expect in U.S. dollars...

Q: The six-month forward rate between the British pound and the

The six-month forward rate between the British pound and the U.S. dollar is $1.75 per pound. If six month interest rates are 3% in the United States and 150 basis points higher in England, what is the...

Q: If the Canadian dollar to U.S. dollar exchange rate

If the Canadian dollar to U.S. dollar exchange rate is 1.28 and the British pound to U.S. dollar exchange rate is 0.62, what must the Canadian dollar to British pound exchange rate be?

Q: The New Zealand dollar to U.S. dollar exchange rate

The New Zealand dollar to U.S. dollar exchange rate is 1.36, and the British pound to U.S. dollar exchange rate is 0.62. If you find that the British pound to New Zealand dollar were trading at 0.49,...

Q: In 1999 the euro was trading at $0.90 per

In 1999 the euro was trading at $0.90 per euro. If the euro is now trading at $1.16 per euro, what is the percentage change in the euro’s value? Is this an appreciation or depreciation?

Q: Consider a bond with a 7% annual coupon and a face

Consider a bond with a 7% annual coupon and a face value of $1,000. Complete the following table. What relationships do you observe between maturity and discount rate and the current price?

Q: Short-term interest rates are 2% in Japan and 4

Short-term interest rates are 2% in Japan and 4% in the United States. The current exchange rate is 120 yen per dollar. If you can enter into a forward exchange rate of 115 yen per dollar, how can you...

Q: If nominal interest rates in America rise but real interest rates fall

If nominal interest rates in America rise but real interest rates fall, predict what will happen to the U.S. exchange rate.

Q: If Mexicans go on a spending spree and buy twice as much

If Mexicans go on a spending spree and buy twice as much French perfume, Japanese TVs, English sweaters, Swiss watches, and Italian wine, what will happen to the value of the Mexican peso?

Q: If expected inflation drops in Europe so that interest rates fall there

If expected inflation drops in Europe so that interest rates fall there, predict what will happen to the exchange rate for the U.S. dollar.