CHAPTER 6 International Parity Relationships andWord格式.docx

CHAPTER 6 International Parity Relationships andWord格式.docx

《CHAPTER 6 International Parity Relationships andWord格式.docx》由会员分享，可在线阅读，更多相关《CHAPTER 6 International Parity Relationships andWord格式.docx（16页珍藏版）》请在冰豆网上搜索。

ForecastingExchangeRates

EfficientMarketApproach

FundamentalApproach

TechnicalApproach

PerformanceoftheForecasters

Summary

MINICASE:

TurkishLiraandPurchasingPowerParity

Appendix6A:

PurchasingPowerParityandExchangeRateDetermination

1Anarbitrageisbestdefinedas:

a）AlegalconditionimposedbytheCFTC.

b）Theactofsimultaneouslybuyingandsellingthesameorequivalentassetsorcommoditiesforthepurposeofmakingreasonableprofits.

c）Theactofsimultaneouslybuyingandsellingthesameorequivalentassetsorcommoditiesforthepurposeofmakingguaranteedprofits.

d）Noneoftheabove

Answer:

c）

2InterestRateParity（IRP）isbestdefinedas:

a）Whenagovernmentbringsitsdomesticinterestrateinlinewithothermajorfinancialmarkets

b）Whenthecentralbankofacountrybringsitsdomesticinterestrateinlinewithitsmajortradingpartners

c）Anarbitrageconditionthatmustholdwheninternationalfinancialmarketsareinequilibrium

3WhenInterestRateParity（IRP）doesnothold

a）thereisusuallyahighdegreeofinflationinatleastonecountry

b）thefinancialmarketsareinequilibrium

c）thereareopportunitiesforcoveredinterestarbitrage

d）bandc

4AformalstatementofIRPis

a）

b）

c）

d）

a）

Rationale:

Equation6.1:

5Supposethattheone-yearinterestrateis5.0percentintheUnitedStates,thespotexchangerateis$1.20/€,andtheone-yearforwardexchangerateis$1.16/€.Whatmustone-yearinterestratebeintheeurozone?

a）5.0%

b）1.09%

c）8.62%

d）Noneoftheabove.

equation6.1:

6Supposethattheone-yearinterestrateis3.0percentintheItaly,thespotexchangerateis$1.20/€,andtheone-yearforwardexchangerateis$1.18/€.Whatmustone-yearinterestratebeintheUnitedStates?

a）1.2833%

b）1.0128%

c）4.75%

a）

7Acurrencydealerhasgoodcreditandcanborroweither$1,000,000or€800,000foroneyear.Theone-yearinterestrateintheU.S.isi$=2%andintheeurozonetheone-yearinterestrateisi€=6%.Thespotexchangerateis$1.25=€1.00andtheone-yearforwardexchangerateis$1.20=€1.00.Showhowtorealizeacertainprofitviacoveredinterestarbitrage.

a）Borrow$1,000,000at2%.Trade$1,000,000for€800,000;

investati€=6%;

translateproceedsbackatforwardrateof$1.20=€1.00,grossproceeds=$1,017,600.

b）Borrow€800,000ati€=6%;

translatetodollarsatthespot,investintheU.S.ati$=2%foroneyear;

translate€848,000backintoeuroattheforwardrateof$1.20=€1.00.Netprofit$2,400.

c）Borrow€800,000ati€=6%;

translate€850,000backintoeuroattheforwardrateof$1.20=€1.00.Netprofit€2,000.

d）Answersc）andb）arebothcorrect

d）

b）istrue:

c）isalsotrue:

There’snothingintheproblemtosuggestthatprofitshavetobeinaparticularcurrency.

8SupposethatyouarethetreasurerofIBMwithanextraUS$1,000,000toinvestforsixmonths.YouareconsideringthepurchaseofU.S.T-billsthatyield1.810%（that’sasixmonthrate,notanannualratebytheway）andhaveamaturityof26weeks.Thespotexchangerateis$1.00=¥

100,andthesixmonthforwardrateis$1.00=¥

110.TheinterestrateinJapan（onaninvestmentofcomparablerisk）is13percent.Whatisyourstrategy?

a）take$1m,investinU.S.T-bills

b）take$1m,translateintoyenatthespot,investinJapan,repatriateyouryenearningsbackintodollarsatthespotrateprevailinginsixmonths.

c）take$1m,translateintoyenatthespot,investinJapan,hedgewithashortpositionintheforwardcontract

d）take$1m,translateintoyenattheforwardrate,investinJapan,hedgewithashortpositioninthespotcontract

9AU.S.-basedcurrencydealerhasgoodcreditandcanborrow$1,000,000foroneyear.Theone-yearinterestrateintheU.S.isi$=2%andintheeurozonetheone-yearinterestrateisi€=6%.Thespotexchangerateis$1.25=€1.00andtheone-yearforwardexchangerateis$1.20=€1.00.Showhowtorealizeacertaindollarprofitviacoveredinterestarbitrage.

b）

10AnItaliancurrencydealerhasgoodcreditandcanborrow€800,000foroneyear.Theone-yearinterestrateintheU.S.isi$=2%andintheeurozonetheone-yearinterestrateisi€=6%.Thespotexchangerateis$1.25=€1.00andtheone-yearforwardexchangerateis$1.20=€1.00.Showhowtorealizeacertaineuro-denominatedprofitviacoveredinterestarbitrage.

11SupposethatyouarethetreasurerofIBMwithanextraUS$1,000,000toinvestforsixmonths.YouareconsideringthepurchaseofU.S.T-billsthatyield1.810%（that’sasixmonthrate,notanannualratebytheway）andhaveamaturityof26weeks.Thespotexchangerateis$1.00=¥

110.WhatmusttheinterestrateinJapan（onaninvestmentofcomparablerisk）bebeforeyouarewillingtoconsiderinvestingthereforsixmonths?

a）11.991%

b）1.12%

c）7.45%

d）–7.45%

Theno-arbitrageconditionis

$1,000,000×

（1.0181）=$1,000,000×

×

（1+i¥

）×

1.0181=

i¥

=1.0181×

–1

=11.991%

12CoveredInterestArbitrage（CIA）activitieswillresultin

a）anunstableinternationalfinancialmarkets

b）restoringequilibriumquitequickly

c）adisintermediation

d）noeffectonthemarket

b）.

13Supposethattheone-yearinterestrateis5.0percentintheUnitedStatesand3.5percentinGermany,andthatthespotexchangerateis$1.12/€andtheone-yearforwardexchangerate,is$1.16/€.Assumethatanarbitrageurcanborrowupto$1,000,000.

a）Thisisanexamplewhereinterestrateparityholds.

b）Thisisanexampleofanarbitrageopportunity;

interestrateparitydoesNOThold.

c）ThisisanexampleofaPurchasingPowerParityviolationandanarbitrageopportunity.

14

Supposethattheannualinterestrateis5.0percentintheUnitedStatesand3.5percentinGermany,andthatthespotexchangerateis$1.12/€andtheforwardexchangerate,withone-yearmaturity,is$1.16/€.Assumethatanarbitragercanborrowupto$1,000,000.Ifanastutetraderfindsanarbitrage,whatisthenetcashflowinoneyear?

a）$10,690

b）$15,000

c）$46,207

d）$21,964.29

$21,964.29=–$1,000,000×

（1.05）+$1,000,000×

（1.035）×

15Supposethattheone-yearinterestrateis5.0percentintheUnitedStatesand3.5percentinGermany,andtheone-yearforwardexchangerateis$1.16/€.Whatmustthespotexchangeratebe?

a）$1.1768/€

b）$1.1434/€.

c）$1.12/€

16AhigherU.S.interestrate（i$↑）willresultin

a）astrongerdollar

b）alowerspotexchangerate（expressedasforeigncurrencyperU.S.dollar）

c）botha）andb）

allelseequal,ahigherU.S.interestratewillattractcapitaltotheU.S.,increasingdemandfordollars,whichleadstoastrongerdollar（andalowerspotratewhenthesportrateisquotedasthenumberofU.S.dollarsperunitofforeigncurrency）.

17IftheinterestrateintheU.S.isi$=5percentforthenextyearandinterestrateintheU.K.isi£

=8percentforthenextyear,uncoveredIRPsuggeststhat

a）Thepoundisexpectedtodepreciateagainstthedollarbyabout3percent.

b）Thepoundisexpectedtoappreciateagainstthedollarbyabout3percent.

c）Thedollarisexpectedtoappreciateagainstthepoundbyabout3percent.

d）a）andc）arebothtrue

18

Acurrencydealerhasgoodcreditandcanborroweither$1,000,000or€800,000foroneyear.Theone-yearinterestrateintheU.S.isi$=2%andintheeurozonetheone-yearinterestrateisi€=6%.Theone-yearforwardexchangerateis$1.20=€