What is the percentage change of the euro against the dollar

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Reference no: EM131914097

Multinational Finance Assignemnt

ANSWER EACH question -

I. Traveling: From Tokyo to New York

After your post-graduation celebratory trip, you are leaving Tokyo for New York. You leave Tokyo with yen 100,000 in your wallet. Upon arriving at the JFK Airport, you observe the following quotes:

Bid Offer

Yen 110/$ Yen 120/$

If you want to exchange Yen 100,000 for dollars at the JFK airport, how much can you get?

II. Percentage change in spot rates

A year ago, the euro was trading at $1.10. Today, it is buying $1.25 per euro. What is the percentage change of the euro against the dollar?

III. Forward contracts

The following quotes for the British pounds, on March 22, 2018, are taken from the Wall Street Journal's Exchange Rates table:

Spot rate: $1.4161/£

1-month forward rate: $1.4158/£

6-month forward rate: $1.4135/£

Please answer the following questions based on the quotes:

1. Is the pound sterling at a forward premium or discount against the dollar? Please explain.

2. On March 22, 2018, General Motors (GM) expects to receive £10 million in six months from an international trade deal. The company worries about a potential decline in the value of the foreign currency. The spot and forward rates are given above. Please answer the following questions:

a. If GM does nothing today, what is the risk facing GM? Please elaborate.

b. If GM uses a six-month forward contract to cover the risk, how much will the firm receive (in dollars) six months from today?

Reference no: EM131914097

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