Financial Management 6 edition Chapter 5---Solutio_原创精品文档.pdfVIP

PROBLEMS

totheportionabovethediagonalinExhibit5.6.

Solution:Thecross-rateformulawewanttouseis:

S(j/k)=S($/k)/S($/j).

Thetriangularmatrixwillcontain4x(4+1)/2=10elements.

¥SF£$

Euro112.751.4128.83511.2238

Japan(100)1.2531.74061.0854

Switzerland.5911.8662

U.K1.4655

2.UsingtheAmericantermquotesfromExhibit5.4,calculatetheone-,three-,andsix-month

forwardcross-exchangeratesbetweentheCanadiandollarandtheSwissfranc.Statethe

forwardcross-ratesin“Canadian”terms.

Solution:Theformulaswewanttouseare:

F(CD/SF)=F($/SF)/F($/CD)

NNN

or

F(CD/SF)=F(CD/$)/F(SF/$).

NNN

WewillusethetopformulathatusesAmericantermforwardexchangerates.

F(CD/SF)=.8671/.9628=.9006

1

F(CD/SF)=.8686/.9624=.9025

3

F(CD/SF)=.8715/.9614=.9065

6

3.AforeignexchangetraderwithaU.S.banktookashortpositionof£5,000,000whenthe$/£

exchangeratewas1.55.Subsequently,theexchangeratehaschangedto1.61.Isthis

movementintheexchangerategoodfromthepointofviewofthepositiontakenbythetrader?

Byhowmuchhasthebank’sliabilitychangedbecauseofthechangeintheexchangerate?

CFAGuidelineAnswer:

Theincreaseinthe$/£exchangerateimpliesthatthepoundhasappreciatedwithrespecttothe

dollar.Thisisunfavorabletothetradersincethetraderhasash