Solutions_ch7

Solutions_ch7 - Problem 7.1-7.3 Forecasting the Pan-Pacific...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Problem 7.1-7.3 Forecasting the Pan-Pacific Pyramid: Australia, Japan & The United States Gross Domestic Product Industrial Retail Unemployment Forecast Production Sales Rate Country Recent Qtr Year Ago 2002 2003e Recent Qtr Recent Qtr Recent Qtr Australia 3.5% 3.7% 3.7% 3.2% 1.6% 5.4% 6.2% Japan 3.2% 1.3% -0.3% 0.2% 6.7% -1.8% 5.5% United States 0.7% 2.8% 2.4% 2.5% 2.1% 4.9% 6.0% Consumer Prices Producer Prices Actual Forecast Country Year Ago 2002 2003e Latest Year Ago Latest Year Ago Australia 3.1% 3.0% 2.7% 1.6% -0.7% 3.6% 4.0% Japan -1.2% -0.9% -0.7% 0.3% -0.8% -1.9% -1.9% United States 1.6% 1.6% 2.1% 1.2% -1.6% 3.0% 3.7% Money Interest Rates (percent per annum) Supply 3-month money market 2-year 10-year Govt bonds Corporate Country Growth Latest Year Ago Govt bonds Latest Year Ago Bonds Australia 10.6% 4.78% 4.28% 4.50% 5.12% 5.86% 5.86% Japan 2.2% 0.30% 0.30% 0.40% 0.87% 1.53% 0.97% United States 6.3% 1.25% 1.79% 1.71% 4.00% 4.93% 6.04% Trade Balance Curent Account Trade-Weighted Exchange Currency Last 12 mos Last 12 mos Actual 2002 Forecast 03 Rate (1990 = 100) per pound Country (billion $) (billion $) (% of GDP) (% of GDP) Feb 5th Year Ago Feb 5th Australia -5.3 -$14.3 -3.9% -4.2% 75.8 73.6 2.78 Japan 92.6 $114.8 2.8% 2.8% 129.7 127.7 197 United States -467.0 -$482.2 -4.8% -5.0% 108.3 124.4 1.65 1. What are the current spot exchange rates for the following cross rates? a. Japanese yen/US dollar exchange rate = (yen/pound spot) / (US$/pound spot) 119.39 b. Japanese yen/Australian dollar exchange rate = (yen/pound spot) / (A$/pound spot) 70.86 c. Australian dollar/US dollar exchange rate = (A$/pound spot) / (US$/pound spot) 1.6848 2. Assuming purchasing power parity, and that the forecast of consumer price increases for the coming year are correct, forecast: a. Japanese yen/US dollar in 1 year = Spot (Y/US$) x (1 + Y-inflation) / (1 + US$-inflation) 116.12 b. Japanese yen/Australian dollar in 1 year = Spot (Y/A$) x (1 + Y-inflation) / (1 + A$-inflation) 68.52 c. Australian dollar/US dollar in 1 year = Spot (A$/US$) x (1 + A$-inflation) / (1 + US$ inflation) 1.6947 3. Asssuming International Fisher applies to the coming year, forecast the following future spot exchange rates using the 2-year government bond interest rates: a. Japanese yen/US dollar in 1 year = Spot (Y/US$) x (1 + i-2year-Yen) / (1 + i-2year-US$)
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 4

Solutions_ch7 - Problem 7.1-7.3 Forecasting the Pan-Pacific...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online