Assignment 1Part I. ECON-3740: International Economics II Chapter 21. Refer to the exchange rates given in the following table:January 20, 2016 January 20, 2015Country (Currency) FX per $ FX per £FX per euro FX per $Canada (dollar) 1.4551 2.056 1.398 1.209Denmark (knone) 6.844 9.694 7.434 6.430Japan (yen) 116.38 164.84 136.97 118.48United Kingdom (pound) 0.706 1.000 0.763 0.660United States (dollar) 1.000 1.416 1.156 1.000Based on the table provided, answer the following questions.A. Compute the U.S dollar-Yen exchange rate and the U.S dollar-Canadian Dollar exchangerate on January 20, 2016 and January 20, 2015.B. What happened to the the value of the U.S dollar relative to the Japanese yen and Canadiandollar between January 20, 2015, and January 20,2016.C. Using information in the table for January 20, 2016, compute the Danish Krone-Canadiandollar exchange rate.2. On January 10, Volkswagen agrees to import auto parts worth $ 7 million from the UnitedStates. The parts will be delivered on March 4 and are payable immediately in dollars. VWdecides to hedge its dollar position by entering into CME future contracts. The spot rate is $0.8942 per euro, and the March futures price is $ 0.9002 per euro.A. Calculate the number of futures contracts that VW must buy to offset its dollar exchangerisk on the parts contract (One CME Euro future contact is 125,000 Euro).B. On March 4, the spot rate turns out to be $ 0.8952 per euro. Calculate VW’s net euro gainor loss on its futures position. Compare this figure with VW’s gain or loss on its unhedgedposition.3. You are a financial adviser to a U.S. corporation that expects to receive a payment of 60million Japanese yen in 180 days for goods exported to Japan. The current spot rate is 100yen per U.S. dollar or 0.01000 dollar per yen. You are concerned that the U.S. dollar is goingto appreciate against the yen over the next six months.A. Assuming the exchange rate remains unchanged, how much does your firm expect to receivein U.S. dollars?B. How much would your firm receive (in U.S. dollars) if the dollar appreciated to 110 yen perU.S. dollar?1Unlock document
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Chapter 2: refer to the exchange rates given in the following table: The parts will be delivered on march 4 and are payable immediately in dollars. Vw decides to hedge its dollar position by entering into cme future contracts. Calculate vw”s net euro gain or loss on its futures position. The current spot rate is 100 yen per u. s. dollar or 0. 01000 dollar per yen. 1: describe how you could use an options contract to hedge against the risk of losses associated with the potential appreciation in the u. s. dollar. Chapter 3: use the table that follows to answer the question. Suppose the cost of the market basket in the united states is pu s. Check to see whether ppp holds for each of the countries listed, and determine whether we should expect a real appreciation or real depreciation for each country (relative to the united states) in the long run. Per$,( ef x/$) price of market basket in fx
