Use the following table of exchange rates to answers questions 1 through 3: Curr

Question

Use the following table of exchange rates to answers questions 1 through 3:

Currency per U.S. $

Canadian Dollar

1.0598

   1-month forward

1.0600

   3-month forward

1.0606

   6-month forward

1.0615

Japanese yen

87.59

   1-month forward

87.54

   3-month forward

87.44

   6-month forward

87.27

1. If you have 5 million Japanese yen, how many dollars do you have?

2. Is the U.S. dollar selling at a premium or a discount relative to the Canadian dollar?

3. How many Japanese yen can you get for one Canadian dollar?

Currency per U.S. $

Canadian Dollar

1.0598

   1-month forward

1.0600

   3-month forward

1.0606

   6-month forward

1.0615

Japanese yen

87.59

   1-month forward

87.54

   3-month forward

87.44

   6-month forward

87.27

Explanation / Answer

1)

1 USD = 87.59 Yen

5 million Yen = 5000000 / 87.59 = 57084.14 USD

2)

F/S-1 –> if positive - denominator is at premium (numerator at discount)

F/S - 1 –> if negative - denominator at discount (numerator at premium)

(1.06 / 1.0598) - 1 = 0.000189 (Poitive)

it is CAD/USD, USD is selling at premium

3)

Yen / CAD = Yen / USD * USD / CAD

                   = 87.59*(1/1.0598) = 82.6477

1 CAD = 82.6477 Yen

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