1. Understanding the foreign exchange rate and exchange risk. a) You just returned from some extensive...

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1. Understanding the foreign exchange rate and exchange risk. a) You just returned from some extensive traveling throughout the Americas. You started your trip with $15,000 in your pocket. You spent 2.6 million pesos while in Chile. You spent 1.1 million bolivares in Venezuela. Then on the way home, you spent 62,000 pesos in Mexico. How many dollars did you have left by the time you returned to the U.S. given the following exchange rates? U.S. $ Equivalent Currency per U.S. $ 536.6984 Country Chile Mexico Venezuela 0.0909 ? 2,147.3002 b) You have an opportunity to buy 250 Canadian dollars with 100 British pounds. Assume you start out with 100 British pounds, is there an arbitrage opportunity? If so, how much profit can you earn? U.S. $ Equivalent Country Canada ? 1.9660 Currency per U.S. $ 1.1576 ? U.K. c) You are expecting a payment of 350,000PLN six years from now. The risk-free rate of return is four percent in the U.S. and three percent in Poland. Currently, you can buy 291PLN for 100USD. How much will the payment six years from now be worth in U.S. dollars? (3pts) d) The current spot rate for the Norwegian krone is $1=NKr6.0888. The expected inflation rate in Norway is three percent and in the U.S. four percent. A risk-free asset in the U.S. is yielding six cent What risk-free rate of return should you expect on a Norwegian security? (Ctrl) - 1. Understanding the foreign exchange rate and exchange risk. a) You just returned from some extensive traveling throughout the Americas. You started your trip with $15,000 in your pocket. You spent 2.6 million pesos while in Chile. You spent 1.1 million bolivares in Venezuela. Then on the way home, you spent 62,000 pesos in Mexico. How many dollars did you have left by the time you returned to the U.S. given the following exchange rates? U.S. $ Equivalent Currency per U.S. $ 536.6984 Country Chile Mexico Venezuela 0.0909 ? 2,147.3002 b) You have an opportunity to buy 250 Canadian dollars with 100 British pounds. Assume you start out with 100 British pounds, is there an arbitrage opportunity? If so, how much profit can you earn? U.S. $ Equivalent Country Canada ? 1.9660 Currency per U.S. $ 1.1576 ? U.K. c) You are expecting a payment of 350,000PLN six years from now. The risk-free rate of return is four percent in the U.S. and three percent in Poland. Currently, you can buy 291PLN for 100USD. How much will the payment six years from now be worth in U.S. dollars? (3pts) d) The current spot rate for the Norwegian krone is $1=NKr6.0888. The expected inflation rate in Norway is three percent and in the U.S. four percent. A risk-free asset in the U.S. is yielding six cent What risk-free rate of return should you expect on a Norwegian security? (Ctrl) -

Answer rating: 100% (QA)

a You have 214730 left b There is no arbitrage opportunity c The payment will be worth 350000 d The ... View the full answer