1. Recreate Table 19.1 for the following currencies: Australian dollar, British pound, Canadian dollar, Chinese yuan, EMU euro, Japanese yen, and Swiss franc. Be sure to show both the direct quotations and indirect quotations.
2. Recreate Table 19.2, which shows the currency cross rates, for the same currencies listed above.
3. Some of the websites show graphs indicating how one currency has done relative to another currency.
a. Over the past year, how has the pound performed against the dollar? Does the dollar buy more or less pounds today than it did 1 year ago?
b. Over the past year, how has the dollar performed against the yen? Does the dollar buy more or less yen today than it did 1 year ago?
4. Some of the websites provide information on the international indexes.
a. How has the FTSE 100 (a U.K. stock index) performed over the past year? Calculate its return (in local currency) over the past year. ( Index value is shown in local currency.) From your answer in question 3a, during this past year would a U.S. investor have earned more or less of a return calculated in dollars?
Calculate the U.S. investor’s approximate dollar return. (Assume that the U.S. investor had originally invested $1,000 in a FTSE 100 index fund at the beginning of the year but wants to liquidate the investment at the end of the year. Ignore any transactions costs.)
b. How has the Nikkei 225 (a Japanese stock index) performed over the past year? Calculate its return (in local currency) over the past year. ( Index value is shown in local currency.) From your answer in question 3b, during this past year would a U.S. investor have earned more or less of a return calculated in dollars? Calculate the U.S. investor’s approximate dollar return. (Assume that the U.S. investor had originally invested $1,000 in a N 225 index fund at the beginning of the year but wants to liquidate the investment at the end of the year. Ignore any transactions costs.)