Question

QUESTION 9

1. Use the following table to answer the next two questions.

   	In Terms of USD
   Country	Bid	Ask
   Canada	$.9225	$.9265
   Euro	$1.45	$1.48

   What is the ask quote for Canadian dollars in terms of euros?

   		.639
   		.6233
   		.6362
   		1.34

QUESTION 10

1. What is the ask quote for euros in terms of Canadian dollars?

   		1.5326
   		1.565
   		1.6043
   		.6233

QUESTION 11

1. A dealer quotes the euro at $1.1345-55 and the peso at $.1056-61. How many euros would you receive in exchange for 50,000 pesos? Round intermediate steps to four decimals and your final answer to nearest whole euro. Do not use non-numerical characters when entering your answer

QUESTION 13

1. Suppose that Japan wishes to use sterilized market intervention to devalue the yen. Japan's central bank would ____ yen and simultaneously_____Japanese treasury securities.

   		buy, buy
   		sell, sell
   		sell, buy
   		buy, sell

Answer 1

ANSWER

Ask quote for Canadian dollars in terms of euros

We will use ask rate $/can$ and ask rate /$

/can$ = ($/can$) * (/$)

Ask rate $/can$ = .9265

Ask rate /$ = 1/1.45

Ask rate /can$ =  .9265 * (1/1.45)

= .639

10) Ask quote for euros in terms of Canadian dollars

can$/ = (can$/$) * ($/)

Ask rate can$/$ = 1/.9225

Ask rate $/ = 1.48

= 1.6043

11) Euros to receive in exchange for 50,000 peso

1 Euro = $1.1345-55

1 peso = $.1056-61

/peso = ($/) * ($/peso)

As we have to sell peso and purchase euro in exchange, bid rate /peso

Bid rate /peso = (1/1.1355) * .1056

Bid rate 1 peso =.0929

50,000 peso = 50000 * .0929

= 4,645

13) In a sterilized intervention, the central bank offsets the purchase or sale of foreign exchange by selling or purchasing domestic securities so as to keep the domestic interest rate at its target.

Japan's central bank would sell yen and simultaneously buy Japanese treasury securities.