国际财务管理课后习题答案.docx

国际财务管理课后习题答案.docx

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国际财务管理课后习题答案

CHAPTER6INTERNATIONALPARITYRELATIONSHIPS

SUGGESTEDANSWERSANDSOLUTIONSTOEND-OF-CHAPTER

QUESTIONSANDPROBLEMS

QUESTIONS

1.Giveafulldefinitionofarbitrage.

Answer:

Arbitragecanbedefinedastheactofsimultaneouslybuyingandsellingthesameorequivalentassetsorcommoditiesforthepurposeofmakingcertain,guaranteedprofits.

2.Discusstheimplicationsoftheinterestrateparityfortheexchangeratedetermination.

Answer:

Assumingthattheforwardexchangerateisroughlyanunbiasedpredictorofthefuturespotrate,IRPcanbewrittenas:

S=[（1+I￡）/（1+I$）]E[St+1?

It].

Theexchangerateisthusdeterminedbytherelativeinterestrates,andtheexpectedfuturespotrate,conditionalonalltheavailableinformation,It,asofthepresenttime.Onethuscansaythatexpectationisself-fulfilling.Sincetheinformationsetwillbecontinuouslyupdatedasnewshitthemarket,theexchangeratewillexhibitahighlydynamic,randombehavior.

3.Explaintheconditionsunderwhichtheforwardexchangeratewillbeanunbiasedpredictorofthefuturespotexchangerate.

Answer:

Theforwardexchangeratewillbeanunbiasedpredictorofthefuturespotrateif（I）theriskpremiumisinsignificantand（ii）foreignexchangemarketsareinformationallyefficient.

4.Explainthepurchasingpowerparity,boththeabsoluteandrelativeversions.Whatcausesthedeviationsfromthepurchasingpowerparity

Answer:

Theabsoluteversionofpurchasingpowerparity（PPP）:

S=P$/P￡.

Therelativeversionis:

e=?

$-?

￡.

PPPcanbeviolatediftherearebarrierstointernationaltradeorifpeopleindifferentcountrieshavedifferentconsumptiontaste.PPPisthelawofonepriceappliedtoastandardconsumptionbasket.

8.Explaintherandomwalkmodelforexchangerateforecasting.Canitbeconsistentwiththetechnicalanalysis

Answer:

Therandomwalkmodelpredictsthatthecurrentexchangeratewillbethebestpredictorofthefutureexchangerate.Animplicationofthemodelisthatpasthistoryoftheexchangerateisofnovalueinpredictingfutureexchangerate.Themodelthusisinconsistentwiththetechnicalanalysiswhichtriestoutilizepasthistoryinpredictingthefutureexchangerate.

*9.Deriveandexplainthemonetaryapproachtoexchangeratedetermination.

Answer:

ThemonetaryapproachisassociatedwiththeChicagoSchoolofEconomics.Itisbasedontwotenets:

purchasingpowerparityandthequantitytheoryofmoney.Combingthesetwotheoriesallowsforstating,say,the$/￡spotexchangerateas:

S（$/￡）=（M$/M￡）（V$/V￡）（y￡/y$）,

whereMdenotesthemoneysupply,Vthevelocityofmoney,andythenationalaggregateoutput.Thetheoryholdsthatwhatmattersinexchangeratedeterminationare:

1.Therelativemoneysupply,

2.Therelativevelocitiesofmonies,and

3.Therelativenationaloutputs.

10.CFAquestion:

1997,Level3.

A.Explainthefollowingthreeconceptsofpurchasingpowerparity（PPP）:

a.Thelawofoneprice.

b.AbsolutePPP.

c.RelativePPP.

B.EvaluatetheusefulnessofrelativePPPinpredictingmovementsinforeignexchangerateson:

a.Short-termbasis（forexample,threemonths）

b.Long-termbasis（forexample,sixyears）

Answer:

A.a.Thelawofoneprice（LOP）referstotheinternationalarbitrageconditionforthestandardconsumptionbasket.LOPrequiresthattheconsumptionbasketshouldbesellingforthesamepriceinagivencurrencyacrosscountries.

A.b.AbsolutePPPholdsthatthepricelevelinacountryisequaltothepricelevelinanothercountry

timestheexchangeratebetweenthetwocountries.

A.c.RelativePPPholdsthattherateofexchangeratechangebetweenapairofcountriesisaboutequal

tothedifferenceininflationratesofthetwocountries.

B.a.PPPisnotusefulforpredictingexchangeratesontheshort-termbasismainlybecause

internationalcommodityarbitrageisatime-consumingprocess.

B.b.PPPisusefulforpredictingexchangeratesonthelong-termbasis.

PROBLEMS

1.SupposethatthetreasurerofIBMhasanextracashreserveof$100,000,000toinvestforsixmonths.Thesix-monthinterestrateis8percentperannumintheUnitedStatesand6percentperannuminGermany.Currently,thespotexchangerateis€1.01perdollarandthesix-monthforwardexchangerateis€0.99perdollar.ThetreasurerofIBMdoesnotwishtobearanyexchangerisk.Whereshouldhe/sheinvesttomaximizethereturn

Themarketconditionsaresummarizedasfollows:

I$=4%;i€=3.5%;S=€1.01/$;F=€0.99/$.

If$100,000,000isinvestedintheU.S.,thematurityvalueinsixmonthswillbe

$104,000,000=$100,000,000（1+.04）.

Alternatively,$100,000,000canbeconvertedintoeurosandinvestedattheGermaninterestrate,withtheeuromaturityvaluesoldforward.Inthiscasethedollarmaturityvaluewillbe

$105,590,909=（$100,000,