HW1_FIN551_S18.pdf - THE UNIVERSITY OF ILLINOIS AT...

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THE UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGN College of Business D E P A R T M E N T O F F I N A N C E FIN 551 Professor Chan International Finance Spring 2018 Homework Assignment 1 Due: 19 February 2018 This assignment may be completed as a group. A group cannot be made up of more than 3 people. If you choose to finish this assignment as a group, submit 1 hard copy with all members’ names listed in alphabetical order. No email submissions will be accepted. 1.The Special Drawing Right (SDR) is a composite currency unit created by the International Monetary Fund (IMF). It is used as the unit of account of the IMF, as well as some international organizations and in a small number of private transactions. The current make-up of the SDR is as follows: Currency Units per SDR Chinese Yuan 1.0174 Euro 0.38671 Japanese yen 11.90 UK pound sterling 0.085946 US dollar 0.58252 Exchange rates for currencies relative to the US dollar are given below. (a) A Canadian investor whose home currency is the Canadian dollar wishes to invest in a 1 million SDR deposit. Based on the supplied exchange rates, what is the cost in Canadian dollars of the deposit? Show your calculations (for this question only, you may use the midpoint quotes of the exchange rate)? (b) Money market rates on different currencies are also given below. If the maturity of the deposit in part (a) is 90 days, what is the SDR deposit worth at maturity (in SDR units)? Show your calculations.
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Currency Money market rates (% p.a., 90 day maturity) Chinese yuan 4.86 Euro -0.382 Japanese yen -0.066 UK pound sterling 0.535 US dollar 1.82 2.The US Dollar Index is a measure of the performance of the US dollar against a basket of the currencies of its major trading partners.
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