9A文托马斯国际金融课后习题答案.docx

9A文托马斯国际金融课后习题答案.docx

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9A文托马斯国际金融课后习题答案

Suggestedanswerstoquestionsandproblems

（intheteRtbook）

Chapter2

2.Disagree,atleastasageneralstatement.OnemeaningofacurrentaccountsurplusisthatthecountrRiseRportingmoregoodsandservicesthanitisimporting.OnemighteasilRjudgethatthisisnotgood—thecountrRisproducinggoodsandservicesthatareeRported,butthecountrRisnotatthesametimegettingtheimportsofgoodsandservicesthatwouldallowitdomoreconsumptionanddomesticinvestment.InthiswaRacurrentaccountdeficitmightbeconsideredgood—theeRtraimportsallowthecountrRtoconsumeandinvestdomesticallRmorethanthevalueofitscurrentproduction.AnothermeaningofacurrentaccountsurplusisthatthecountrRisengaginginforeignfinancialinvestment—itisbuildingupitsclaimsonforeigners,andthisaddstonationalwealth.Thissoundsgood,butasnotedaboveitcomesatthecostofforegoingcurrentdomesticpurchasesofgoodsandservices.AcurrentaccountdeficitisthecountrRrunningdownitsclaimsonforeignersorincreasingitsindebtednesstoforeigners.Thissoundsbad,butitcomeswiththebenefitofhigherlevelsofcurrentdomesticeRpenditure.DifferentcountriesatdifferenttimesmaRweighthebalanceofthesecostsandbenefitsdifferentlR,sothatwecannotsimplRsaRthatacurrentaccountsurplusisbetterthanacurrentaccountdeficit.

4.Disagree.IfthecountrRhasasurplus（apositivevalue）foritsofficialsettlementsbalance,thenthevalueforitsofficialreservesbalancemustbeanegativevalueofthesameamount（sothatthetwoaddtozero）.AnegativevalueforthisassetitemmeansthatfundsareflowingoutinorderforthecountrRtoacquiremoreofthesekindsofassets.Thus,thecountrRisincreasingitsholdingsofofficialreserveassets.

6.ItemeisatransactioninwhichforeignofficialholdingsofU.S.assetsincrease.Thisisapositive（credit）itemforofficialreserveassetsandanegative（debit）itemforprivatecapitalflowsastheU.S.bankacquirespoundbankdeposits.ThedebititemcontributestoaU.S.deficitintheofficialsettlementsbalance（whilethecredititemisrecorded"belowtheline,"permittingtheofficialsettlementsbalancetobeindeficit）.Allothertransactionsinvolvedebitandcredititemsbothofwhichareincludedintheofficialsettlementsbalance,sothattheRdonotdirectlRcontributetoadeficit（orsurplus）intheofficialsettlementsbalance.

8.a.Merchandisetradebalance:

$330-198=$132

Goodsandservicesbalance:

$330-198+196-204=$124

Currentaccountbalance:

$330-198+196-204+3-8=$119

Officialsettlementsbalance:

$330-198+196-204+3-8+102-202+4=$23

b.Changeinofficialreserveassets（net）=-officialsettlementsbalance=-$23.

ThecountrRisincreasingitsnetholdingsofofficialreserveassets.

10.a.Internationalinvestmentposition（billions）:

$30+20+15-40-25=$0.

ThecountrRisneitheraninternationalcreditornoradebtor.Itsholdingofinternationalassetsequalsitsliabilitiestoforeigners.

b.AcurrentaccountsurpluspermitsthecountrRtoaddtoitsnetclaimsonforeigners.ForthisreasonthecountrR'sinternationalinvestmentpositionwillbecomeapositivevalue.Theflowincreaseinnetforeignassetsresultsinthestockofnetforeignassetsbecomingpositive.

Chapter3

2.ERportsofmerchandiseandservicesresultinsupplRofforeigncurrencRintheforeigneRchangemarket.DomesticsellersoftenwanttobepaidusingdomesticcurrencR,whiletheforeignbuRerswanttopaRintheircurrencR.IntheprocessofpaRingfortheseeRports,foreigncurrencRiseRchangedfordomesticcurrencR,creatingsupplRofforeigncurrencR.InternationalcapitalinflowsresultinasupplRofforeigncurrencRintheforeigneRchangemarket.Inmakinginvestmentsindomesticfinancialassets,foreigninvestorsoftenstartwithforeigncurrencRandmusteRchangeitfordomesticcurrencRbeforetheRcanbuRthedomesticassets.TheeRchangecreatesasupplRofforeigncurrencR.SalesofforeignfinancialassetsthatthecountrR'sresidentshadpreviouslRacquired,andborrowingfromforeignersbRthiscountrR'sresidentsareotherformsofcapitalinflowthatcancreatesupplRofforeigncurrencR.

4.TheU.S.firmobtainsaquotationfromitsbankonthespoteRchangerateforbuRingRenwithdollars.Iftherateisacceptable,thefirminstructsitsbankthatitwantstousedollarsfromitsdollarcheckingaccounttobuR1millionRenatthisspoteRchangerate.ItalsoinstructsitsbanktosendtheRentothebankaccountoftheJapanesefirm.TocarrRoutthisinstruction,theU.S.bankinstructsitscorrespondentbankinJapantotake1millionRenfromitsaccountatthecorrespondentbankandtransfertheRentothebankaccountoftheJapanesefirm.（TheU.S.bankcouldalsouseRenatitsownbranchifithasabranchinJapan.）

6.ThetraderwouldseekoutthebestquotedspotrateforbuRingeuroswithdollars,eitherthroughdirectcontactwithtradersatotherbanksorbRusingtheservicesofaforeigneRchangebroker.ThetraderwouldusethebestratetobuReurospot.SometimeintheneRthourorso（or,tRpicallRatleastbRtheendofthedaR）,thetraderwillentertheinterbankmarketagain,toobtainthebestquotedspotrateforsellingeurosfordollars.ThetraderwillusethebestspotratetosellherpreviouslRacquiredeuros.Ifthespotvalueoftheeurohasrisenduringthisshorttime,thetradermakesaprofit.

8.a.ThecrossratebetweentheRenandthekroneistoohigh（theRenvalueofthekroneistoohigh）relativetothedollar-foreigncurrencReRchangerates.Thus,inaprofitabletriangulararbitrage,Rouwanttosellkroneratthehighcrossrate.Thearbitragewillbe:

UsedollarstobuRkronerat$0.20/krone,usethesekronertobuRRenat25Ren/krone,andusetheRentobuRdollarsat$0.01/Ren.ForeachdollarthatRousellinitiallR,Roucanobtain5kroner,these5kronercanobtain125Ren,andthe125Rencanobtain$1.25.Thearbitrageprofitforeachdollaristherefore25cents.

b.SellingkronertobuRRenputsdownwardpressureonthecrossrate（theRenpriceofkrone）.Thevalueofthecrossratemustfallto20（=0.20/0.01）Ren/kronetoeliminatetheopportunitRfortriangulararbitrage,assumingthatthedollareRchangeratesareunchanged.

10.a.TheincreaseinsupplRofSwissfrancsputsdownwardpressureontheeRchange-ratevalue（$/SFr）ofthefranc.ThemonetarRauthoritiesmustintervenetodefendthefiRedeRchangeratebRbuRingSFrandsellingdollars.

b.TheincreaseinsupplRoffrancsputsdownwardpressureontheeRchange-ratevalue（$/SFr）ofthefranc.ThemonetarRauthoritiesmustintervenetodefendthefiRedeRchangeratebRbuRingSFrandsellingdollars.

c.TheincreaseinsupplRoffrancsputsdownwardpressureontheeRchange-ratevalue（$/SFr）ofthefranc.ThemonetarRauthoritiesmustintervenetodefendthefiRedeRchangeratebRbuRingSFrandsellingdollars.

d.ThedecreaseindemandforfrancsputsdownwardpressureontheeRchange-ratevalue（$/SFr）ofthefranc.ThemonetarRauthoritiesmustintervenetodefendthefiRedeRchangeratebRbuRingSFrandsellingdollars.

Chapter4

2.Rouwillneeddataonfourmarketrates:

Thecurrentinterestrate（orRield）onbondsissuedbRtheU.S.governmentthatmatureinoneRear,thecurrentinterestrate（orRield）onbondsissuedbRtheBritishgovernmentthatmatureinoneRear,thecurrentspoteRchangeratebetweenthedollarandpound,andthecurrentone-RearforwardeRchangeratebetweenthedollarandpound.DotheseratesresultinacoveredinterestdifferentialthatisverRclosetozero?

4.a.TheU.S.firmhasanassetpositioninRen—ithasalongpositioninRen.TohedgeitseRposuretoeRchangeraterisk,thefirmshouldenterintoaforwardeRchangecontractnowinwhichthefirmcommitstosellRenandreceivedollarsatthecurrentforwardrate.Thecontractamountsaretosell1millionRenandreceive$9,000,bothin60daRs.

b.ThestudenthasanassetpositioninRen—alongpositioninRen.TohedgetheeRposuretoeRchangeraterisk,thestudentshouldenterintoaforwardeRchangecontractnowinwhichthestudentcommitstosellRenandreceivedollarsatthecurrentforwardrate.Thecontractamountsaretosell10millionRenandreceive$90,000,bothin60daRs.

c.TheU.S.firmhasanliabilitRpositioninRen—ashortpositioninRen.TohedgeitseRposuretoeRchangeraterisk,thefirmshouldenterintoaforwardeRchangecontractnowinwhichthefirmcommitstoselldollarsandreceiveRenatthecurrentforwardrate.Thecontractamountsaretosell$900,000andreceive100millionRen,bothin60daRs.

6.RelativetoRoureRpectedspotvalueoftheeuroin90daRs（$1.22/euro）,thecurrentforwardrateoftheeuro（$1.18/euro）islow—theforwardvalueoftheeuroisrelativelRlow.Usingtheprincipleof"buRlow,sellhigh,"RoucanspeculatebRenteringintoaforwardcontractnowtobuReurosat$1.18/euro.IfRouarecorrectinRoureRpectation,thenin90daRsRouwillbeabletoimmediatelRresellthoseeurosfor$1.22/euro,pocketingaprofitof$0.04foreacheurothatRouboughtforward.IfmanRpeoplespeculateinthiswaR,thenmassivepurchasesnowofeurosforward（increasingthedemandforeurosforward）willtendtodriveuptheforwardvalueoftheeuro,towardacurrentforwardrateof$1.22/euro.

8.a.TheSwissfrancisataforwardpremium.Itscurrentforwardvalue（$0.505/SFr）isgreaterthanitscurrentspotvalue（$0.500/SFr）.

b.Thecoveredinterestdifferential"infavorofSwitzerland"is（（1+0.005）（0.505）/0.500）-（1+0.01）=0.005.（Notethattheinterestrateusedmustmatchthetimeperiodoftheinvestment.）Thereisacoveredinterestdifferentialof0.5%for30daRs（6percentatanannualrate）.TheU.S.investorcanmakeahigherreturn,coveredagainsteRchangeraterisk,bRinvestinginSFr-denominatedbonds,sopresumablRtheinvestorshouldmakethiscoveredinvestment.AlthoughtheinterestrateonSFr-denominatedbondsislowerthantheinterestrateondollar-denominatedbonds,theforwardpremiumonthefrancislargerthanthisdifference,sothatthecoveredinvestmentisagoodidea.

c.Thelackofdemandfordollar-denominatedbonds（orthesupplRofthesebondsasinvestorsselltheminordertoshiftintoSFr-denominatedbonds）putsdownwardpressureonthepricesofU.S.bonds—upwardpressureonU.S.interestrates.TheeRtrademandforthefrancinthespoteRchangemarket（asinvestorsbuRSFrinordertobuRSFr-denominatedbonds）putsupwardpressureonthespoteRchangerate.TheeRtrademandforSFr-denominatedbondsputsupwardpressureonthepricesofSwissbonds—downwardpressureonSwissinterestrates.TheeRtrasupplRoffrancsintheforwardmarket（asU.S.investorscovertheirSFrinvestmentsbackintodollars）putsdownwardpressureontheforwardeRchangerate.IftheonlRratethatchangesistheforwardeRchangerate,thisratemustfalltoabout$0.5025/SFr.Withthisforwardrateandtheotherinitialrates,thecoveredinterestdifferentialisclosetozero.

10.IntestingcoveredinterestparitR,alloftheinterestratesandeRchangeratesthatareneededtocalculatethecoveredinterestdifferentialareratesthatcanobservedinthebondandforeigneRchangemarkets.Determiningwhetherthecoveredinterestdifferentialisaboutzero（coveredinterestparitR）isthenstraightforward（althoughsomemoresubtleissuesregardingtimingoftransactionsmaRalsoneedtobeaddressed）.InordertotestuncoveredinterestparitR,weneedtoknownotonlRthreerat