托马斯国际金融课后习题答案.docx
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托马斯国际金融课后习题答案
Suggestedanswerstoquestionsandproblems
Chapter2
2.Disagree,atleastasageneralstatement.Onemeaningofacurrentaccountsurplusisthatthecountryisexportingmoregoodsandservicesthanitisimporting.Onemighteasilyjudgethatthisisnotgood—thecountryisproducinggoodsandservicesthatareexported,butthecountryisnotatthesametimegettingtheimportsofgoodsandservicesthatwouldallowitdomoreconsumptionanddomesticinvestment.Inthiswayacurrentaccountdeficitmightbeconsideredgood—theextraimportsallowthecountrytoconsumeandinvestdomesticallymorethanthevalueofitscurrentproduction.Anothermeaningofacurrentaccountsurplusisthatthecountryisengaginginforeignfinancialinvestment—itisbuildingupitsclaimsonforeigners,andthisaddstonationalwealth.Thissoundsgood,butasnotedaboveitcomesatthecostofforegoingcurrentdomesticpurchasesofgoodsandservices.Acurrentaccountdeficitisthecountryrunningdownitsclaimsonforeignersorincreasingitsindebtednesstoforeigners.Thissoundsbad,butitcomeswiththebenefitofhigherlevelsofcurrentdomesticexpenditure.Differentcountriesatdifferenttimesmayweighthebalanceofthesecostsandbenefitsdifferently,sothatwecannotsimplysaythatacurrentaccountsurplusisbetterthanacurrentaccountdeficit.
4.Disagree.Ifthecountryhasasurplusforitsofficialsettlementsbalance,thenthevalueforitsofficialreservesbalancemustbeanegativevalueofthesameamount.Anegativevalueforthisassetitemmeansthatfundsareflowingoutinorderforthecountrytoacquiremoreofthesekindsofassets.Thus,thecountryisincreasingitsholdingsofofficialreserveassets.
6.ItemeisatransactioninwhichforeignofficialholdingsofU.S.assetsincrease.ThisisapositiveitemforofficialreserveassetsandanegativeitemforprivatecapitalflowsastheU.S.bankacquirespoundbankdeposits.ThedebititemcontributestoaU.S.deficitintheofficialsettlementsbalance.Allothertransactionsinvolvedebitandcredititemsbothofwhichareincludedintheofficialsettlementsbalance,sothattheydonotdirectlycontributetoadeficitintheofficialsettlementsbalance.
8.a.Merchandisetradebalance:
$330-198=$132
Goodsandservicesbalance:
$330-198+196-204=$124
Currentaccountbalance:
$330-198+196-204+3-8=$119
Officialsettlementsbalance:
$330-198+196-204+3-8+102-202+4=$23
b.Changeinofficialreserveassets=-officialsettlementsbalance=-$23.
Thecountryisincreasingitsnetholdingsofofficialreserveassets.
10.a.Internationalinvestmentposition:
$30+20+15-40-25=$0.
Thecountryisneitheraninternationalcreditornoradebtor.Itsholdingofinternationalassetsequalsitsliabilitiestoforeigners.
b.Acurrentaccountsurpluspermitsthecountrytoaddtoitsnetclaimsonforeigners.Forthisreasonthecountry'sinternationalinvestmentpositionwillbecomeapositivevalue.Theflowincreaseinnetforeignassetsresultsinthestockofnetforeignassetsbecomingpositive.
Chapter3
2.Exportsofmerchandiseandservicesresultinsupplyofforeigncurrencyintheforeignexchangemarket.Domesticsellersoftenwanttobepaidusingdomesticcurrency,whiletheforeignbuyerswanttopayintheircurrency.Intheprocessofpayingfortheseexports,foreigncurrencyisexchangedfordomesticcurrency,creatingsupplyofforeigncurrency.Internationalcapitalinflowsresultinasupplyofforeigncurrencyintheforeignexchangemarket.Inmakinginvestmentsindomesticfinancialassets,foreigninvestorsoftenstartwithforeigncurrencyandmustexchangeitfordomesticcurrencybeforetheycanbuythedomesticassets.Theexchangecreatesasupplyofforeigncurrency.Salesofforeignfinancialassetsthatthecountry'sresidentshadpreviouslyacquired,andborrowingfromforeignersbythiscountry'sresidentsareotherformsofcapitalinflowthatcancreatesupplyofforeigncurrency.
4.TheU.S.firmobtainsaquotationfromitsbankonthespotexchangerateforbuyingyenwithdollars.Iftherateisacceptable,thefirminstructsitsbankthatitwantstousedollarsfromitsdollarcheckingaccounttobuy1millionyenatthisspotexchangerate.ItalsoinstructsitsbanktosendtheyentothebankaccountoftheJapanesefirm.Tocarryoutthisinstruction,theU.S.bankinstructsitscorrespondentbankinJapantotake1millionyenfromitsaccountatthecorrespondentbankandtransfertheyentothebankaccountoftheJapanesefirm.
6.Thetraderwouldseekoutthebestquotedspotrateforbuyingeuroswithdollars,eitherthroughdirectcontactwithtradersatotherbanksorbyusingtheservicesofaforeignexchangebroker.Thetraderwouldusethebestratetobuyeurospot.Sometimeinthenexthourorso,thetraderwillentertheinterbankmarketagain,toobtainthebestquotedspotrateforsellingeurosfordollars.Thetraderwillusethebestspotratetosellherpreviouslyacquiredeuros.Ifthespotvalueoftheeurohasrisenduringthisshorttime,thetradermakesaprofit.
8.a.Thecrossratebetweentheyenandthekroneistoohighrelativetothedollar-foreigncurrencyexchangerates.Thus,inaprofitabletriangulararbitrage,youwanttosellkroneratthehighcrossrate.Thearbitragewillbe:
Usedollarstobuykronerat$0.20/krone,usethesekronertobuyyenat25yen/krone,andusetheyentobuydollarsat$0.01/yen.Foreachdollarthatyousellinitially,youcanobtain5kroner,these5kronercanobtain125yen,andthe125yencanobtain$1.25.Thearbitrageprofitforeachdollaristherefore25cents.
b.Sellingkronertobuyyenputsdownwardpressureonthecrossrate.Thevalueofthecrossratemustfallto20<=0.20/0.01>yen/kronetoeliminatetheopportunityfortriangulararbitrage,assumingthatthedollarexchangeratesareunchanged.
10.a.TheincreaseinsupplyofSwissfrancsputsdownwardpressureontheexchange-ratevalue<$/SFr>ofthefranc.ThemonetaryauthoritiesmustintervenetodefendthefixedexchangeratebybuyingSFrandsellingdollars.
b.Theincreaseinsupplyoffrancsputsdownwardpressureontheexchange-ratevalue<$/SFr>ofthefranc.ThemonetaryauthoritiesmustintervenetodefendthefixedexchangeratebybuyingSFrandsellingdollars.
c.Theincreaseinsupplyoffrancsputsdownwardpressureontheexchange-ratevalue<$/SFr>ofthefranc.ThemonetaryauthoritiesmustintervenetodefendthefixedexchangeratebybuyingSFrandsellingdollars.
d.Thedecreaseindemandforfrancsputsdownwardpressureontheexchange-ratevalue<$/SFr>ofthefranc.ThemonetaryauthoritiesmustintervenetodefendthefixedexchangeratebybuyingSFrandsellingdollars.
Chapter4
2.Youwillneeddataonfourmarketrates:
ThecurrentinterestrateonbondsissuedbytheU.S.governmentthatmatureinoneyear,thecurrentinterestrateonbondsissuedbytheBritishgovernmentthatmatureinoneyear,thecurrentspotexchangeratebetweenthedollarandpound,andthecurrentone-yearforwardexchangeratebetweenthedollarandpound.Dotheseratesresultinacoveredinterestdifferentialthatisveryclosetozero?
4.a.TheU.S.firmhasanassetpositioninyen—ithasalongpositioninyen.Tohedgeitsexposuretoexchangeraterisk,thefirmshouldenterintoaforwardexchangecontractnowinwhichthefirmcommitstosellyenandreceivedollarsatthecurrentforwardrate.Thecontractamountsaretosell1millionyenandreceive$9,000,bothin60days.
b.Thestudenthasanassetpositioninyen—alongpositioninyen.Tohedgetheexposuretoexchangeraterisk,thestudentshouldenterintoaforwardexchangecontractnowinwhichthestudentcommitstosellyenandreceivedollarsatthecurrentforwardrate.Thecontractamountsaretosell10millionyenandreceive$90,000,bothin60days.
c.TheU.S.firmhasanliabilitypositioninyen—ashortpositioninyen.Tohedgeitsexposuretoexchangeraterisk,thefirmshouldenterintoaforwardexchangecontractnowinwhichthefirmcommitstoselldollarsandreceiveyenatthecurrentforwardrate.Thecontractamountsaretosell$900,000andreceive100millionyen,bothin60days.
6.Relativetoyourexpectedspotvalueoftheeuroin90days<$1.22/euro>,thecurrentforwardrateoftheeuro<$1.18/euro>islow—theforwardvalueoftheeuroisrelativelylow.Usingtheprincipleof"buylow,sellhigh,"youcanspeculatebyenteringintoaforwardcontractnowtobuyeurosat$1.18/euro.Ifyouarecorrectinyourexpectation,thenin90daysyouwillbeabletoimmediatelyresellthoseeurosfor$1.22/euro,pocketingaprofitof$0.04foreacheurothatyouboughtforward.Ifmanypeoplespeculateinthisway,thenmassivepurchasesnowofeurosforwardwilltendtodriveuptheforwardvalueoftheeuro,towardacurrentforwardrateof$1.22/euro.
8.a.TheSwissfrancisataforwardpremium.Itscurrentforwardvalue<$0.505/SFr>isgreaterthanitscurrentspotvalue<$0.500/SFr>.
b.Thecoveredinterestdifferential"infavorofSwitzerland"is<<1+0.005>⋅<0.505>/0.500>-<1+0.01>=0.005.