Answers for Chapter 7 Study Guide
1. a. 99.75
b. 103.69
c. 113.40
d. 107.1
2. undervalued
3. $0.894/$Can. Buy gold in Canada, sell in U.S.
4. Franc - depreciate Mark - appreciate 3%.
5. F(90) = $1.4541/pound
F(180) = $1.4282/pound
6. above
7. long
8. short
9. 6%
10. sell dollars forward
11. discount - 10.32%
12. undervalued
13. a. $.412/DM
b. buy DM bonds, sell DM forward
14. a. $80,000
b. 0
c. $200,000
15. a. $1.524/pound
b. $1.509/pound
c. $1.478/pound
16. 11.26% (Italy) vs. 10.55% (Germany)
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