国际金融 第四章 答案

Answers to Chapter Four

1. Given that the exchange rate is expressed as dollars to euros, we treat the dollar

as the domestic currency. Note also that interest rates are quoted on an annual basis

even though the maturity period is only one month. In this problem we divide the

interest rates by 12 to put them on a one-month basis.

a. The interest rate differential, therefore, is (1.75%/12 - 3.25%/12) = -0.125%.

The forward premium/discount, expressed as a percentage, is calculated as:

((F-S)/S)?100 = ((1.089 – 1.072)/1.072)?100=1.5858%

b. Transaction costs are shown in the figure above by the dashed lines that interest

the horizontal axis at values of -1.00 and 1.00.

c. The positive value indicates that the euro is selling at a premium. In addition,

the interest rate differential favors the euro-denominated instrument. Hence, a

saver shift funds to euro-denominated instruments.

2. Using the provided information:

(1.75/12) – (3.25/12) < [(1.089 - 1.072/1.072)]?100

-0.125% < 1.5858%.

3. The four markets are graphed below.

Graph 1, the spot market for the euro.

人们在即期市场将美元等货币兑换成

欧元，以期保值和升值。所以对欧元

需求上升。

R – R*

450 (F-S)/S

-0.125 1.5858

1.00 -1.00

Graph 4, U.S. loanable funds Graph 5, Euro loanable funds

In graph 1, the demand for the euro rises as international savers shift funds into

euro-denominated instruments. In graph 2, the supply of euros increases in the

forward market. (Consider a U.S. saver that moves funds into a euro-denominated

instrument. They would desire to sell the euro forward so they may convert

euro-denominated proceeds at the time of maturity into their dollar equivalent.)

Graph 3 illustrates a decrease in loanable funds in the United States as savers shift

funds to euro-denominated instruments. Graph 4 illustrates the increase in the

supply of loanable funds that occurs when savers shift funds to the euro-denominated

instrument.

4. Suppose we have two pounds, one is converted into euro in the spot market and

saved into an Euro Account, and another is saved into an Pound Account and the

principal and its interest has been sold in the forward market. Because 1.5245×

1.03125=

1.5721 > 1.04250×1.4575 = 1.5194, an arbitrage opportunity exists in this

example if one were to borrow the pound and lend the euro. Suppose you were

to borrow one pound, the steps are then:

a. Borrow ￡1, conver t to €1.5245 on the spot market.

b. Lend euros, yielding €1.5245?(1.03125) = €1.5721.

c. See euros forward, yielding €1.5721/1.4575 = ￡1.0787.

d. Repay the pound loan at ￡1?(1.04250) = ￡1.04250.

$/€

e. The profit is ￡0.0362, or 3.62 percent.

5. Because interest rates are quoted as annualized rates, we need to divide each

interest rate by 4 (12/3). The uncovered interest parity equation is:

R -R* = (S e+1 - S) /S

a. Rewriting the equation for the expected future expected exchange rate yields:

S e+1 = [(R- R*) + 1]S

b. Using the values given yields the expected future spot rate

S e+1 = [(0.0124/4 - 0.0366/4) + 1]?1.5492 = 1.5398.

6. Given this information, we can calculate the forward premium/discount with the

UIP condition:

(F - S)/S = R - R*

The interest differential is 1.75% - 3.25% = -1.5%. This is the expected forward premium on the euro. Hence, (F – 1.08)/1.08 = -0.015 implies that F = 1.0638.

7. We can adjust for the shorter maturity by dividing the interest rates by 2 (12/6).

Now the interest differential is -0.75%, still a forward premium on the euro. The forward rate now is (F – 1.08)/1.08 = -0.0075 implies that F = 1.0719.

8. The U.S. real rate is 1.24% – 2.1% = -0.86% and the Canadian real rate is 2.15%

– 2.6% = -0.45%. Ignoring transaction costs, because the real interest rates are not equal, real interest parity does not hold.

9. Uncovered interest parity is R -R* = (S e+1 - S) /S + ρ.

a. Using the same process as in question 5 above, the expected future spot rate is:

S e+1 = [(R- R*) + 1]S,

S e+1 = [(0.075 - 0.035) + 1]?30.35 = 31.564.

b. Using the same process as in question 5 above, the expected future spot rate is:

S e+1 = [(R- R*) + 1 - ρ]S,

S e+1 = [(0.075 - 0.035) + 1 –0.02]?30.35 = 30.957.

10. Because the forward rate, 30.01, is less than the expected future spot rate, 30.957,

you should sell the koruna forward. For example, $1 would purchase k30.957, which you could sell forward yielding k30.957/30.01 = $1.0316.

11. International financial instruments:

a. Global Bond: long term instruments issued in the domestic currency.

b. Eurobond: term is longer than one year and is issued in a foreign currency.

c. Eurocurrency: keyword is that it is a deposit.

d. Global equity: keyword is that it is a shar

e.