Please show ALL calculations Question 4.(15 points) Shown below are exchange rates for several currencies. ------------US$ per
Question:
Please show ALL calculations
Question 4.(15 points) Shown below are exchange rates for several currencies.
------------US$ per 1 euro --- US$ per 1 franc --- Mexican peso per US$1
Spot rate -------1.21 --------------------1.03 -------------------19.68
30-day
forward rate ---1.19 ----------------------1.06 -------------------20.15
60-day
forward rate ---1.15 ----------------------1.07 ---------------------21.28
a.Is the euro appreciating or depreciating against the U.S. dollar?Explain.
b.Is the Swiss franc appreciating or depreciating against the U.S. dollar?Why?
c.Is the Mexican peso appreciating or depreciating against the U.S. dollar?Why?
d.A U.S. company purchases goods from several foreign companies with payment due in euros, francs, and pesos.Which suppliers should the company pay now?Which suppliers should the company pay in 60 days?Why?
e.From (d) above, who bears the foreign exchange risk, the U.S. company or the foreign suppliers?Explain.
International Economics Theory and Policy
ISBN: 978-0134519579
11th Edition
Authors: Paul R. Krugman, Maurice Obstfeld, Marc Melitz