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Finance question I need assistance with please complete in Excel


Week 7DQ Problem Set 1

 

Suppose the exchange rate between U.S. dollars and Swiss francs is SF 1.41 = $1.00, and the exchange

 

rate between the U.S. dollar and the euro is $1.00 = 1.64 euros. What is the cross-rate of Swiss francs to

 

euros? What is the cross-rate of euros to Swiss francs?

 

Suppose that 1 British pound currently equals 1.62 U.S. dollars and 1 U.S. dollar equals 1.62 Swiss francs.

 

What is the cross rate of Swiss francs to British pound?

 

A trader observes that, in the spot exchange market, $1 can be exchanged for 9 Mexican pesos or for

 

111.23 Japanese yen. What is the cross-rate between the yen and the peso, that is, how many yen would

 

you receive for every peso exchanged? Problem Set 2

 

If the spot rate of the Israeli shekel is 5.51 shekels per dollar and the 180-day forward rate is 5.97 shekels

 

per dollar, then the forward rate for the Israeli shekel is selling at a ____ to the spot rate. (should the

 

answer be premium or discount?) Problem Set 3

 

In 1985, a given Japanese imported automobile sold for 1,476,000 yen, or $8,200. If the car still sold for

 

the same amount of yen today but the current exchange rate is 144 yen per dollar, what would the car

 

be selling for today in U.S. dollars Problem Set 4

 

Given the following exchange rates, which of the following currencies are selling at a premium? In U.S. $ Per U.S. $ Canada (Dollar) 0.8077 1.2381 6-mos forward 0.8096 1.2352 Japan (yen) 0.009963 100.37 6-mos forward 0.009999 100.01 Switzerland (franc) 0.8752 1.1426 6-mos forward 0.8788 1.1379 UK (pound) 1.4729 0.6789 6-mos forward 1.4741 0.6784 Problem Set 5

 

Suppose the spot exchange rate for the Canadian dollar is C$1.23 and the six-month forward rate is

 

C$1.27.

 

What is worth more, a U.S. dollar or a Canadian dollar?

 

Is the U.S. dollar selling at a premium or a discount relative to the Canadian dollar? Problem Set 6

 

Suppose the Japanese yen exchange rate is ¥106 = $1 and the British Pound exchange rate is £1 = $1.51.

 

What is the cross-rate in terms of yen per pound?

 

Suppose a dealer quotes a rate of ¥165 = £1. Is there an arbitrage opportunity here? If there is, explain

 

how to take advantage of the mispricing? Problem Set 7

 

Suppose the Swiss Franc exchange rate is SF 2.00 = $1.00 and the British Pound exchange rate is £0.60 =

 

$1.00.

 

Suppose a dealer quotes a rate of SF 4.00 = £1. Is there an arbitrage opportunity here? If there is, explain

 

how to take advantage of the mispricing? How to identify premium versus discount

 

Looking in terms of foreign currency per one unit of US dollar (for example, euro per dollar):

 

If the forward rate in foreign currency per one unit of US dollar (for example, euro per dollar)

 

is higher than the spot rate, then the US dollar is trading at a premium. Because you are getting more

 

foreign currency per US dollar in the forward market.

 

If the forward rate in foreign currency per one unit of US dollar (for example, euro per dollar)

 

is lower than the spot rate, then the US dollar is trading at a discount. Because you are getting less

 

foreign currency per US dollar in the forward market.

 

Or, you can also look at it in terms of US dollar per foreign currency (for example, dollar per euro) as

 

follows: If the forward rate in US dollar per one unit of foreign currency (for example, dollar per euro)

 

is higher than the spot rate, then the US dollar is trading at a discount. Because you are paying more US

 

dollars to get one unit of foreign currency in the forward market.

 

If the forward rate in US dollar per one unit of foreign currency (for example, dollar per euro)

 

is lower than the spot rate, then the US dollar is trading at a premium. Because you are paying less US

 

dollars to get one unit of foreign currency in the forward market. Inventory Management Problem Set

 

ABC Furniture sells 2,400 sofas a year at an average price per sofa of $1,250. The carrying cost per unit is

 

$11.60. The company orders 80 sofas at a time and has a fixed order cost of $52 per order. The sofas are

 

sold out before they are restocked.

 

What are the total number of orders in a year?

 

What is the total carrying cost?

 

What is the total restocking cost? Note: restocking cost is same as shortage cost.

 

What are the total costs?

 

What is the economic order quantity?

 

How many orders will company place if it follows the economic order quantity model?

 

Should the company increase or decrease its order size in order to follow the EOQ model?

 







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