a. The dollar is presently worth .8 euros. What is the direct exchange rate of the euro? b. The direct exchange rate of the euro is presently valued higher than it was last month. What does this imply about the movement of the indirect exchange rate of the euro over the last month? Each Quarter during the Year, Sanoma’s Main Business Transactions Will Be to: Currency Used in Transaction Expected Movement in Currency’s Value against the U.S. Dollar during This Year How the Expected Currency Movement Will Affect Sanoma’s Net Cash Flows (and Therefore Value) This Year a. Import materials from Canada Canadian dollar Depreciate b. Export products to Germany Euro Appreciate c. Receive remitted earnings from its foreign subsidiary in Argentina Argentine peso Appreciate d. Receive interest from its Australian cash account Australian dollar Depreciate e. Make loan payments on a loan provided by a Japanese bank Japanese yen Depreciate c. The Wall Street Journal quotes the Australian dollar to be worth $.50, while the one-year forward rate of the Australian dollar is $.51. What is the forward rate premium? What is the expected rate of appreciation (or depreciation) if the one-year forward rate is used to predict the value of the Australian dollar in one year?

a. A euro $1.25. b. The indirect value of the euro must have declined over the last month. c. The forward premium is 2 percent. If the forward rate is used to forecast, the expected degree of appreciation over the next year is ($.51 - $.50)/$.50 = 2%, which is the same as the forward rate premium.

Question 8.MSE.4: a. The dollar is presently worth .8 euros. What is the direc...

International Financial Management

a. The dollar is presently worth .8 euros. What is the direct exchange rate of
the euro?
b. The direct exchange rate of the euro is presently valued higher than it was last
month. What does this imply about the movement of the indirect exchange rate of
the euro over the last month?

Each Quarter during the Year, Sanoma’s Main Business Transactions Will Be to:	Currency Used in Transaction	Expected Movement in Currency’s Value against the U.S. Dollar during This Year	How the Expected Currency Movement Will Affect Sanoma’s Net Cash Flows (and Therefore Value) This Year
a. Import materials from Canada	Canadian dollar	Depreciate
b. Export products to Germany	Euro	Appreciate
c. Receive remitted earnings from its foreign subsidiary in Argentina	Argentine peso	Appreciate
d. Receive interest from its Australian cash account	Australian dollar	Depreciate
e. Make loan payments on a loan provided by a Japanese bank	Japanese yen	Depreciate

c. The Wall Street Journal quotes the Australian dollar to be worth $.50, while the
one-year forward rate of the Australian dollar is $.51. What is the forward rate
premium? What is the expected rate of appreciation (or depreciation) if the one-year
forward rate is used to predict the value of the Australian dollar in one year?

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