F08_W09 Foreign Exchange Problems

# F08_W09 Foreign Exchange Problems - PartOne:,200809...

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Use the following September 24th, 2008 and October 24th, 2008 rates to answer these questions. October 24 th 2008 September 24 th , 2008 Country / Currency in US \$ Per US \$ in US \$ Per US \$ Canada (dollar) .7857 1.2728 .9645 1.0368 1 Month Forward .7861 1.2721 .9650 1.0363 Euro 1.2585 .7946 1.4620 .6840 Japan (yen) .010571 94.60 .009425 106.10 1 Month Forward .0010590 94.43 .009460 105.71 Switzerland (franc) .8549 1.1697 .9163 1.0914 UK (pound) 1.5904 .6288 1.8469 .5414 1 Month Forward 1.5882 .6296 1.8454 .5419 1. The international manager for Southeast Asia at Nike wants to take a trip to Hong Kong to secure a manufacturing deal. He can buy a round trip ticket from Bellingham to Hong Kong for US\$1020. Alternatively, he can buy a Vancouver/Hong Kong round trip ticket for \$1000 Canadian. Which ticket is cheaper in U.S. dollars? Evidently the airline is not using market exchange rates. What is the actual exchange rate being used by the airline in this example? Looking at the forward rate for September, did the price match at that rate better than at the current rate? 2. The same Nike manager has arranged a marketing promotion for the “Air Jordan” range in Tokyo, Japan. He has decided to stay at the Imperial Hotel, but now he has to figure out how much to send as a deposit for his room. The hotel reservation says he owes them 26,000 yen as a deposit. When he goes to a local bank and asks them to write a check for that amount, how much will it cost him in U.S. dollars on September 24 th ? (Assume the bank does not charge him a check writing fee, which it would). When the hotel billed him, it gave him the option of sending \$260.00 in U.S. dollars instead. Should he send dollars?

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F08_W09 Foreign Exchange Problems - PartOne:,200809...

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