国际金融作业

1.examine the following summary of the U.S.balance of ，payments for 2000(in＄ billion) and fill in the blank entries.

Credits Debits Current Account (1)Exports 1,418. [1.1]Merchandise 774.86 [1.2]Services 290.88 [1.3]Factors income 352.90 (2)Imports -1,809.18 [2.1]Merchandise -1,224.43 [2.2]Services -217.07 [2.3]Factors income -367.68 (3)Unilateral transfer 10.24 -.39 Balance on current account -444.69 Capital Account (4)Direct investment 287.68 -152.44 (5)Portfolio investment 474.59 -124.94 [5.1]Equity securities 193.85 -99.74 [5.2]Debt securities 280.74 -25.20 (6)Other investment 262. -303.27 Balance on capital account 793.91 (7)Statistical discrepancies -348.92 Overall balance 0.3 Official Reserve Account -0.3

Merchandise = - 1,809.18 + 217.07 + 367.68 = -1224.43

Balance on current account = 1,418. - 1,809.18 + 10.24 – .39 = - 444.69

Balance on capital account = 287.68 + 474.59 + 193.85 + 280.74 + 262. - 152.44 - 124.94 - 99.74 - 25.20 - 303.27 = 793.91

Statistical discrepancies = 0.3 + 444.69 – 793.91 = - 348.92

P136 problem 8

A bank is quoting the following exchange rates against the dollar for the Swiss franc and the Australian dollar:

SFr/$=1.5960-70 A$/$=1.7225-35

An Australian firm asks the bank for an A$/SFrquote. What cross-rate would the bank quote?

(1) Bid rate for A$/SFr Bid rate for A$

Offered rate for SFr

① Offered SFr buy A$

SFr1=$1.5970 ② Convert $ into A$

1$1=A$

1.7225③ Bid rate for A$/SFr

1SFr1=A$1.5970×=0.9266

1.7225A$1= SFr1.0786 ①

(2) Offered rate for A$/ SFr Bid rate for SFr

Offered rate for A$ ① offered A$ buy $

1$1=A$

1.7235② convert $ into SFr SFr1=$1.5960

③ Offered rate for A$/SFr

1SFr1=A$×1.5960=1.9260

1.7235A$1=SFr1.0799 ②

In conclusion, an Australian firm ask the bank for an A$/SFr quote A$/SFr=1.0786-99

P136 problems11

11.assume you are trader with Deutsche bank. from the quote screen on year computer terminal, you notice that Dresdner bank is quoting €0.7927/＄1.00 and Credit Suisse is offering

SF1.1806/＄1.00. You learn that UBS is making a direct market between the Swiss franc and the euro, with a current /SF quote of 6395,show how you can make a triangular arbitrage profit by trading at these prices. (Ignore bid-ask spreads for this problem.) assume you have $5.000.000 with which to conduct the arbitrage. What happens if you initially sell dollars for Swiss francs? What € /SF prices will eliminate triangular arbitrage?

sell $5,000,000 to Dresdner Bank at €0.7627/$1.00. This trade would yield €3,813,500= $5,000,000 x .7627.

price of €0.6395/SF1.00, yielding SF5,963,253 = €3,813,500/.6395.

Credit Suisse for $5,051,036 = SF5,963,253/1.1806, arbitrage profit of $51,036. If the Deutsche Bank trader initially sold $5,000,000 for Swiss francs the trade would yield SF5,903,000 = $5,000,000 x 1.1806.

The Swiss francs would in turn be traded for euros to UBS for €3,774,969= SF5,903,000 x .6395. The euros would be resold to for $4,949,481 = €3,774,969/.7627, or a loss of $50,519.

The S(€/SF) cross exchange rate should be 0.7627/1.1806 =0 .60

Swiss francs are purchased for only €0.6395/SF1.00 instead of the no-arbitrage rate of €0.60/SF1.00.

That is, each Swiss franc is sold for €0.6395/SF1.00 instead of the higher no-arbitrage rate of €0.60/SF1.00.