|Exercise 24.1||Exchange Rates and Currency Risk|
Figure 24-1 in the text shows a graph of exchanges rates of U.S. dollars per British pound over time. You can use the interactive PACIFIC Exchange Rate Service provided by Professor Werner Antweiler to produce similar graphs for various pairs of currencies.
Get familiar with the Plot Data feature and read the "Explanations" found there. Now, update Figure 24-1. Use the same starting date as that mentioned in Figure 24-1. For an ending date, use the date your class first met this term and for "Frequency" choose "monthly averages."
Q. After comparing your graph with that found in the text, can you explain what has happened to exchange rates and their volatility (i.e., currency risk) since the textbook graph was produced?
|Exercise 24.2||Big Mac Purchasing Power Parity|
The Big Mac index helps to illustrate purchasing-power parity in an entertaining way. A link to the most recent article on the Big Mac index appearing in The Economist magazine can be found in Part VIII: Special Areas of Financial Management of the textbook's main Web site.
Use information found in the latest Big Mac index article to update the information and discussion found in the "Big Mac Purchasing-Power Parity" boxed feature appearing towards the end of Chapter 24 in the text.
Q. Have the textbook's predictions about which currencies in the boxed feature's table would appreciate/depreciate against the U.S. dollar come true? Are there any surprises? Explain.
|Exercise 24.3||Exchange Rates|
In Table 24-3 in your text, you will find exchange rates involving the U.S. dollar as of a particular date. In Part VIII: Special Areas of Financial Management of the textbook's main Web site, you will find links to a number of Web sites providing historical exchange rate quotations. The links are listed under the heading "Foreign Exchange Rates."
Visit some of those sites and get familiar with how they work. Now, using one of these sites, update the spot rate information found in the text's Table 24-3 as of the first day that your class met this term.
Q. After comparing your new Table with that in the text, which currencies have appreciated (gotten stronger) against the U.S. dollar and which currencies have depreciated (gotten weaker) against the U.S. dollar?
|Exercise 24.4||The Euro|
There is a section in Chapter 24 of your text entitled "The Euro." A number of Web links in Part VIII: Special Areas of Financial Management of the textbook's main Web site that are flagged with the euro symbol (see above) will lead you to a wealth of information about the euro. Use that information to update and expand "The Euro" section in the book so that it reflects the most current information.
Q. What are the major changes/developments to the euro that you uncovered? And, how might an understanding of the euro be useful to you in the future?
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