1 / 7

CAPITAL MARKET: allocates debt and equity resources

Friday the dollar was trading at 116.68 yen, down from 119.45 Thursday. Sterling was at $1.7065, down from $1.7110. Is the exchange rate quote for the U.S. dollar a direct or indirect quote on the (a) yen? (b) sterling (British Pound)?

ivor-cervantes
Download Presentation

CAPITAL MARKET: allocates debt and equity resources

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Friday the dollar was trading at 116.68 yen, down from 119.45 Thursday. Sterling was at $1.7065, down from $1.7110. • Is the exchange rate quote for the U.S. dollar a direct or indirect quote on the (a) yen? (b) sterling (British Pound)? • If 1$=116 yen: which is the quoted and which is base currency? • From Thursday to Friday, what was the percentage change in the value of the dollar against the yen? (b) sterling?

  2. CAPITAL MARKET: allocates debt and equity resources • OFFSHORE FINANCIAL CENTERS: Operational (London) and Booking (islands) • INTERBANK (LIBOR) rates • HEDGING - insurance • ARBITRAGE – instantaneous • SPOT RATE – FORWARD RATE • CURRENCY OPTION

  3. $1 = ¥120 • Base currency is $, quoted currency is ¥. • Direct quote on ¥, indirect quote on $. • ¥1 = $0.00833 • $ is quoted currency & direct quote • Direct quote = 1/Indirect quote • Indirect quote = 1/Direct quote

  4. PERCENT CHANGE • *YIELD IS ON BASE CURRENCY • January $1=D5, May $1=D4 • % Change= (Pn-Po)/Po x 100 • (4-5/5) x 100 = -20%

  5. MEXICO CRISIS 1994 • Fast growth • Portfolio investment • Chiapas & assassination • Rising U.S. interest rates • ’94 devaluation & $50 bil. loan

  6. ARGENTINA 2001-2002 • Populism • Hyperinflation • Currency board - $ • Brazil devalues in 1999 • U.S. $ strong • Debt crisis, Peso loses 70% of value

  7. EURO DEPRECIATION ‘02 • Cash under the mattress? • Taxman? Police? • Spain “Dinero “B” = est. $53 bil. • Italy = $175 bil?

More Related