Multiple choice

1. Suppose 6 months ago a Swiss investor bought a 6-month U.S. Treasury bill at a price of $9,708.74, with a maturity value of $10,000.  The exchange rate at that time was 1.420 Swiss francs per dollar.  Today, at maturity, the exchange rate is 1.324 Swiss francs per dollar.  What is the annualized rate of return to the Swiss investor?

-7.92%

-4.13%

6.00%

8.25%

12.00%              

2. In 1985, a given Japanese imported automobile sold for 1,476,000 yen, or $8,200.  If the car still sold for the same amount of yen today but the current exchange rate is 144 yen per dollar, what would the car be selling for today in U.S. dollars?

$5.964

$8,200

$10,250

$12,628

$13,525              

3. Suppose hockey skates sell in Canada for 105 Canadian dollars, and 1 Canadian dollar equals 0.71 U.S. dollars.  If purchasing power parity (PPP) holds, what is the price of hockey skates in the United States?

$14.79

$63.00

$74.55

$85.88

$147.88

4. Suppose a foreign investor who holds tax-exempt Eurobonds paying 9% is considering investing in an equivalent-risk domestic bond in a country with a 28% withholding tax on interest paid to foreigners.  If 9% after-tax is the investor's required return, what before-tax rate would the domestic bond need to pay to provide the required after-tax return?

9.00%

10.20%

11.28%

12.50%

13.57%