国际财务管理后习题答案(第六章).doc

CHAPTER 6 INTERNATIONAL PARITY RELATIONSHIPS SUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMS QUESTIONS 1. Give a full definition of arbitrage. Answer: Arbitrage can be defined as the act of simultaneously buying and selling the same or equivalent assets or commodities for the purpose of making certain, guaranteed profits. 2. Discuss the implications of the interest rate parity for the exchange rate determination. Answer: Assuming that the forward exchange rate is roughly an unbiased predictor of the future spot rate, IRP can be written as: S = [(1 + I￡)/(1 + I$)]E[St+1?It]. The exchange rate is thus determined by the relative interest rates, and the expected future spot rate, conditional on all the available information, It, as of the present time. One thus can say that expectation is self-fulfilling. Since the information set will be continuously updated as news hit the market, the exchange rate will exhibit a highly dynamic, random behavior. 3. Explain the conditions under which the forward exchange rate will be an unbiased predictor of the future spot exchange rate. Answer: The forward exchange rate will be an unbiased predictor of the future spot rate if (I) the risk premium is insignificant and (ii) foreign exchange markets are informationally efficient. 4. Explain the purchasing power parity, both the absolute and relative versions. What causes the deviations from the purchasing power parity? Answer: The absolute version of purchasing power parity (PPP): S = P$/P￡. The relative version is: e = ?$ - ?￡. PPP can be violated if there are barriers to international trade or if people in different countries have different consumption taste. PPP is the law of one price applied to a standard consumption basket. 8. Explain the random walk model for exchange rate forecasting. Can it be consistent with the technical analysis? Answer: The random walk model predicts that the current exchange rate will