The International Financial Environment

3. Exchange Rate Effects on Investing

The appreciation of Australian dollar against the U.S. dollar would decrease the U.S. dollar value in Australia and the return to the U.S. firm will be decreased that invested in the Australian money market security.

4. Exchange Rate Effects on Borrowing

The appreciation of Japanese yen against the U.S. dollar would decrease the value of U.S. dollar that would adversely affect the return to a U.S. firm that borrowed Japanese yen because the firm would have to pay more dollar against Japanese yen as the proceeds were used for the U.S. project.

6. Bid/Ask Spread

Utah Bank’s bid price = $0.7983

Ask price = $0.81

Bid/ask percentage spread = (0.81 - 0.7983) / 0.81

                                                = .02 and 2%

7. Bid/Ask Spread

Ask rate = $0.11

Bid rate = $0.10

Bid/ask percentage = (0.11 – 0.10) / 0.11

                                    = .091 and 9.1%

10. Indirect Exchange Rate

Direct Exchange Rate of the Euro = $1.25

Indirect Exchange Rate of the Euro = 1/$1.25

Value of Dollar in Euros = 0.80

11. Cross Exchange Rate

Poland’s currency (the zloty) = $0.17

Japanese Yen = $0.008

Cross rate of zloty with respect to yen = $0.17 / $0.008

1 zloty = 21.25/yen