托马斯国际金融课后习题答案.docx

1、托马斯国际金融课后习题答案Suggested answers to questions and problems Chapter 22. Disagree, at least as a general statement. One meaning of a current account surplus is that the country is exporting more goods and services than it is importing. One might easily judge that this is not goodthe country is producing

2、 goods and services that are exported, but the country is not at the same time getting the imports of goods and services that would allow it do more consumption and domestic investment. In this way a current account deficit might be considered goodthe extra imports allow the country to consume and i

3、nvest domestically more than the value of its current production. Another meaning of a current account surplus is that the country is engaging in foreign financial investmentit is building up its claims on foreigners, and this adds to national wealth. This sounds good, but as noted above it comes at

4、 the cost of foregoing current domestic purchases of goods and services. A current account deficit is the country running down its claims on foreigners or increasing its indebtedness to foreigners. This sounds bad, but it comes with the benefit of higher levels of current domestic expenditure. Diffe

5、rent countries at different times may weigh the balance of these costs and benefits differently, so that we cannot simply say that a current account surplus is better than a current account deficit.4. Disagree. If the country has a surplus for its official settlements balance, then the value for its

6、 official reserves balance must be a negative value of the same amount . A negative value for this asset item means that funds are flowing out in order for the country to acquire more of these kinds of assets. Thus, the country is increasing its holdings of official reserve assets.6. Item e is a tra

7、nsaction in which foreign official holdings of U.S. assets increase. This is a positive item for official reserve assets and a negative item for private capital flows as the U.S. bank acquires pound bank deposits. The debit item contributes to a U.S. deficit in the official settlements balance . All

8、 other transactions involve debit and credit items both of which are included in the official settlements balance, so that they do not directly contribute to a deficit in the official settlements balance.8. a. Merchandise trade balance: $330 - 198 = $132 Goods and services balance: $330 - 198 + 196

9、- 204 = $124 Current account balance: $330 - 198 + 196 - 204 + 3 - 8 = $119 Official settlements balance: $330 - 198 + 196 - 204 + 3 - 8 + 102 - 202 + 4 = $23 b. Change in official reserve assets = - official settlements balance = -$23. The country is increasing its net holdings of official reserve

10、assets.10. a. International investment position : $30 + 20 + 15 - 40 - 25 = $0. The country is neither an international creditor nor a debtor. Its holding of international assets equals its liabilities to foreigners. b. A current account surplus permits the country to add to its net claims on foreig

11、ners. For this reason the countrys international investment position will become a positive value. The flow increase in net foreign assets results in the stock of net foreign assets becoming positive.Chapter 32. Exports of merchandise and services result in supply of foreign currency in the foreign

12、exchange market. Domestic sellers often want to be paid using domestic currency, while the foreign buyers want to pay in their currency. In the process of paying for these exports, foreign currency is exchanged for domestic currency, creating supply of foreign currency. International capital inflows

13、 result in a supply of foreign currency in the foreign exchange market. In making investments in domestic financial assets, foreign investors often start with foreign currency and must exchange it for domestic currency before they can buy the domestic assets. The exchange creates a supply of foreign

14、 currency. Sales of foreign financial assets that the countrys residents had previously acquired, and borrowing from foreigners by this countrys residents are other forms of capital inflow that can create supply of foreign currency.4. The U.S. firm obtains a quotation from its bank on the spot excha

15、nge rate for buying yen with dollars. If the rate is acceptable, the firm instructs its bank that it wants to use dollars from its dollar checking account to buy 1 million yen at this spot exchange rate. It also instructs its bank to send the yen to the bank account of the Japanese firm. To carry ou

16、t this instruction, the U.S. bank instructs its correspondent bank in Japan to take 1 million yen from its account at the correspondent bank and transfer the yen to the bank account of the Japanese firm. 6. The trader would seek out the best quoted spot rate for buying euros with dollars, either thr

17、ough direct contact with traders at other banks or by using the services of a foreign exchange broker. The trader would use the best rate to buy euro spot. Sometime in the next hour or so , the trader will enter the interbank market again, to obtain the best quoted spot rate for selling euros for do

18、llars. The trader will use the best spot rate to sell her previously acquired euros. If the spot value of the euro has risen during this short time, the trader makes a profit.8. a. The cross rate between the yen and the krone is too high relative to the dollar-foreign currency exchange rates. Thus,

19、in a profitable triangular arbitrage, you want to sell kroner at the high cross rate. The arbitrage will be: Use dollars to buy kroner at $0.20/krone, use these kroner to buy yen at 25 yen/krone, and use the yen to buy dollars at $0.01/yen. For each dollar that you sell initially, you can obtain 5 k

20、roner, these 5 kroner can obtain 125 yen, and the 125 yen can obtain $1.25. The arbitrage profit for each dollar is therefore 25 cents. b. Selling kroner to buy yen puts downward pressure on the cross rate . The value of the cross rate must fall to 20 yen/krone to eliminate the opportunity for trian

21、gular arbitrage, assuming that the dollar exchange rates are unchanged.10. a. The increase in supply of Swiss francs puts downward pressure on the exchange-rate value of the franc. The monetary authorities must intervene to defend the fixed exchange rate by buying SFr and selling dollars. b. The inc

22、rease in supply of francs puts downward pressure on the exchange-rate value of the franc. The monetary authorities must intervene to defend the fixed exchange rate by buying SFr and selling dollars. c. The increase in supply of francs puts downward pressure on the exchange-rate value of the franc. T

23、he monetary authorities must intervene to defend the fixed exchange rate by buying SFr and selling dollars. d. The decrease in demand for francs puts downward pressure on the exchange-rate value of the franc. The monetary authorities must intervene to defend the fixed exchange rate by buying SFr and

24、 selling dollars.Chapter 42. You will need data on four market rates: The current interest rate on bonds issued by the U.S. government that mature in one year, the current interest rate on bonds issued by the British government that mature in one year, the current spot exchange rate between the doll

25、ar and pound, and the current one-year forward exchange rate between the dollar and pound. Do these rates result in a covered interest differential that is very close to zero?4. a. The U.S. firm has an asset position in yenit has a long position in yen. To hedge its exposure to exchange rate risk, t

26、he firm should enter into a forward exchange contract now in which the firm commits to sell yen and receive dollars at the current forward rate. The contract amounts are to sell 1 million yen and receive $9,000, both in 60 days. b. The student has an asset position in yena long position in yen. To h

27、edge the exposure to exchange rate risk, the student should enter into a forward exchange contract now in which the student commits to sell yen and receive dollars at the current forward rate. The contract amounts are to sell 10 million yen and receive $90,000, both in 60 days. c. The U.S. firm has

28、an liability position in yena short position in yen. To hedge its exposure to exchange rate risk, the firm should enter into a forward exchange contract now in which the firm commits to sell dollars and receive yen at the current forward rate. The contract amounts are to sell $900,000 and receive 10

29、0 million yen, both in 60 days.6. Relative to your expected spot value of the euro in 90 days , the current forward rate of the euro is lowthe forward value of the euro is relatively low. Using the principle of buy low, sell high, you can speculate by entering into a forward contract now to buy euro

30、s at $1.18/euro. If you are correct in your expectation, then in 90 days you will be able to immediately resell those euros for $1.22/euro, pocketing a profit of $0.04 for each euro that you bought forward. If many people speculate in this way, then massive purchases now of euros forward will tend t

31、o drive up the forward value of the euro, toward a current forward rate of $1.22/euro.8. a. The Swiss franc is at a forward premium. Its current forward value is greater than its current spot value . b. The covered interest differential in favor of Switzerland is / 0.500 - = 0.005. Note that the interest rat