Question

6. Use the foreign exchange section of a current issue of the wall street journal to look up the six currencies in problem 19-5. A. What is the current exchange rate for changing dollars into 1,000 units of pounds, Canadian dollars, euros, yen, Mexican pesos, and Swedish kronas? B. What is the percentage gain or loss between the May 29, 2014, exchange rate and the current exchange rate for each of the currencies in part A? 9. Use the foreign exchange section of a current issue of the wall street journal to look up the three currencies in problem 19-8. What is the current exchange rate between Swedish kronas and pounds? 10. Assume that interest rate parity holds. In the spot market 1 Japanese yen = $0.00982, while in the 90-day forward market 1 Japanese yen = $0.00983. In Japan, 90-day risk-free securities yield 2%. What is the yield on the 90- day risk- free securities in the United States?

Answer 1

Current exchange rates for dollars is as follows for six currencies as on 11/5/2018:

1 dollar=0.74 pounds/ 1.28 canadian dollars/ 0.84 euro/ 109.38 yen/ 19.43 mexican peso/ 8.59 swedish krona

Exchange rates for dollars is as follows for six currencies as on 29/5/2014:

1 dollar=0.59816 pounds/ 1.04815 canadian dollars/ 0.73481 euro/ 101.595 yen/ 12.84355 mexican peso/ 6.6437 swedish krona

Foreign exchange gains/losses in percentage for six currencies between these two dates are:

Pounds= (0.59816-0.74)/0.59816= -0.2371 or 23.71% loss

Canadian dollar= (1.04815-1.28)/1.04815=-0.2212 or 22.12% loss

Euro= (0.73481-0.84)/0.73481=-0.1432 or 14.32% loss

Yen= (101.595-109.38)/101.595=-0.0766 or 7.66% loss

Mexican Peso= (12.84355-19.43)/12.84355=-0.5128 or 51.28% loss

Swedish Krona= (6.6437-8.59)/6.6437= -0.293 or 29.3% loss

Current exchange rate between Swedish krona and pounds= 0.0861 krona/pound

As per IRP,

that is 2.11%.