英文版国际金融试题和答案

PartⅠ.Decide whether each of the following statements is true or false (10%)每题1分，答错不扣分

1. If perfect markets existed, resources would be more mobile and could therefore be transferred to those countries more willing to pay a high price for them. ( T )

2. The forward contract can hedge future receivables or payables in foreign currencies to insulate the firm against exchange rate risk. ( T )

3. The primary objective of the multinational corporation is still the same primary objective of any firm, i.e., to maximize shareholder wealth. ( T )

4. A low inflation rate tends to increase imports and decrease exports, thereby decreasing the current account deficit, other things equal. ( F )

5. A capital account deficit reflects a net sale of the home currency in exchange for other currencies. This places up ward pressure on that home currency’s value. ( F )

6. The theory of comparative advantage implies that countries should specialize in production, thereby relying on other countries for some products. ( T )

7. Covered interest arbitrage is plausible when the forward premium reflect the interest rate differential between two countries specified by the interest rate parity formula. ( F )

8．The total impact of transaction exposure is on the overall value of the firm. ( F )

9. A put option is an option to sell-by the buyer of the option-a stated number of units of the underlying instrument at a specified price per unit during a specified period. ( T )

10. Futures must be marked-to-market. Options are not. ( T )

PartⅡ:Cloze (20%)每题2分，答错不扣分

1. If inflation in a foreign country differs from inflation in the home country, the exchange rate will adjust to maintain equal( purchasing power ）

2. Speculators who expect a currency to ( appreciate ) could purchase currency futures contracts for that currency.

3. Covered interest arbitrage involves the short-term investment in a foreign currency that is covered by a ( forward contract ) to sell that currency when the investment matures.

4. （Appreciation/ Revalue ）of RMB reduces inflows since the foreign demand for our goods is reduced and foreign competition is increased.

5. ( PPP ) suggests a relationship between the inflation differential of two countries and the percentage change in the spot exchange rate over time.

6. IFE is based on nominal interest rate ( differentials ), which are influenced by expected inflation.

7. Transaction exposure is a subset of economic exposure. Economic exposure includes any form by which the firm’s ( value ) will be affected.

8. The option writer is obligated to buy the underlying commodity at a stated price if a ( put option ) is exercised

9. There are three types of long-term international bonds. They are Global bonds , ( eurobonds ) and ( foreign bonds ).

10. Any good secondary market for finance instruments must have an efficient clearing system. Most Eurobonds are cleared through either ( Euroclear ) or Cedel.

PartⅢ:Questions and Calculations (60%)过程正确结果计算错误扣2分

1. Assume the following information:

A Bank

B Bank

Bid price of Canadian dollar $0.802 $0.796

Ask price of Canadian dollar $0.808 $0.800

Given this information, is locational arbitrage possible? If so, explain the steps involved in locational arbitrage, and compute the profit from this arbitrage if you had $1,000,000 to use. (5%)

ANSWER:

Yes! One could purchase New Zealand dollars at Y Bank for $.80 and sell them to X Bank for $.802. With $1 million available, 1.25 million New Zealand dollars could be purchased at Y Bank. These New Zealand dollars could then be sold to X Bank for $1,002,500, thereby generating a profit of $2,500.

2. Assume that the spot exchange rate of the British pound is $1.90. How will this spot rate adjust in two years if the United Kingdom experiences an inflation rate of 7 percent per year while the United States

experiences an inflation rate of 2 percent per year?(10%)

ANSWER:

According to PPP, forward rate/spot=indexdom/indexfor

the exchange rate of the pound will depreciate by 4.7 percent. Therefore, the spot rate would adjust to $1.90 ×[1 + (–.047)] = $1.8107

3. Assume that the spot exchange rate of the Singapore dollar is $0.70. The one-year interest rate is 11 percent in the United States and 7 percent in Singapore. What will the spot rate be in one year according to the IFE? (5%)

ANSWER: according to the IFE,St+1/St=(1+Rh)/(1+Rf)

$.70 × (1 + .04) = $0.728

4. Assume that XYZ Co. has net receivables of 100,000 Singapore dollars in 90 days. The spot rate of the S$ is $0.50, and the Singapore interest rate is 2% over 90 days. Suggest how the U.S. firm could implement a money market hedge. Be precise . (10%)

ANSWER: The firm could borrow the amount of Singapore dollars so that the 100,000 Singapore dollars to be received could be used to pay off the loan. This amounts to (100,000/1.02) = about S$98,039, which could be converted to about $49,020 and invested. The borrowing of Singapore dollars has offset the transaction exposure due to the future receivables in Singapore dollars.

5. A U.S. company ordered a Jaguar sedan. In 6 months , it will pay ￡30,000 for the car. It worried that pound ster1ing might rise sharply from the current rate($1.90). So, the company bought a 6 month pound call (supposed contract size = ￡35,000) with a strike price of $1.90 for a premium of 2.3 cents/￡.

(1)Is hedging in the options market better if the ￡ rose to $1.92 in 6 months?

(2)what did the exchange rate have to be for the company to break even?（15%）

Solution:

(1)If the ￡ rose to $1.92 in 6 months, the U.S. company would exercise the pound call option. The sum of the strike price and premium is

$1.90 + $0.023 = $1.9230/￡

This is bigger than $1.92.

So hedging in the options market is not better.

(2) when we say the company can break even, we mean that hedging or not hedging doesn’t matter. And only when (strike price + premium )= the exchange rate ,

hedging or not doesn’t matter.

So, the exchange rate =$1.923/￡.

6. Discuss the advantages and disadvantages of fixed exchange rate system.(15%)

textbook page50 答案以教材第50 页为准

PART Ⅳ: Diagram(10%)

The strike price for a call is $1.67/￡. The premium quoted at the Exchange is $0.0222 per British pound. Diagram the profit and loss potential, and the break-even price for this call option

Solution:

Following diagram shows the profit and loss potential, and the break-even price of this put option:

PART Ⅴ:Additional Question

Suppose that you are expecting revenues of Y 100,000 from Japan in one month. Currently, 1 month forward contracts are trading at $1 = $105 Yen. You have the following estimate of the Yen/$ exchange rate in one month.

a)

b) Calculate the expected value of the hedge.

c) How could you replicate this hedge in the money market?

You are expecting revenues of Y100,000 in one month that you will need to covert to dollars. You could hedge this in forward markets by taking long positions in US dollars (short positions in Japanese Yen). By locking in your price at $1 = Y105, your dollar revenues are guaranteed to be

Y100,000/ 105 = $952

You could replicate this hedge by using the following:

a) Borrow in Japan

b) Convert the Yen to dollars

c) Invest the dollars in the US

d) Pay back the loan when you receive the Y100,000