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459hw01 - country 90-day annualized appreciate or forward...

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Brigham Young University Department of Economics Economics 459 - International Finance Homework #1 Due 1/18 Name: Foreign Exchange Instruments 1. You can find quotes on exchange rates in a variety of sources. One source is section 3 of the Wall Street Journal . Another is the Financial Times of London. This is what is reproduced in the handout. Find and report data for the exchange rate between the U.S. dollar and the currencies of the following five countries. country currency exchange rate 90-day forward r a t e Canada _______ _______ Euro Area _______ _______ Japan _______ _______ Switzerland _______ _______ U. K. _______ _______ _______ _______ _______ 2. Compare the value spot exchange rate with the 3-month forward rate for the currencies listed in question 1. Calculate the annualized forward premium/discount for each of these currencies and report them below. Note whether the currency is expected to appreciate or depreciate against the dollar in the next 3 months.
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Unformatted text preview: country 90-day annualized appreciate or forward premium depreciate? Canada _______ _______ Japan _______ _______ Switzerland _______ _______ U. K. _______ _______ 3. Using the handout calculate the cost of buying 500,000 Australian dollars on the second Thursday in December if the price is locked in with a futures contract. 4. Effective exchange rates are used to compare the price of foreign currency in general over time. The average value of the spot rates observed in foreign currency markets for 1990 were: 1.1668 Canadian $ per U.S. $ 1.0455 ECU (now euro) per U.S. $ 144.79 Japanese ¥ per U.S. $ 1.7847 U.S. $ per British £ Using the following weights calculate the effective exchange rate for the U.S. at the date used in question 1. Canada 11.7% Euro Area 55.3% Japan 17.6% U.K. 15.4% Effective exchange rate (1990 base year) is: Did the general cost of foreign currency rise or fall between 1990 and the present?...
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