International Monetary Fund, International Financial Statistics Essay

International Mo sack upary Fund, International Financial Statistics - Essay ExampleIn Euros this would amount to 100,000/1.4950=66889.63. The ask rate is being used because the perverter of the share would first sell the Euros in the American market to get a 100,000 long horses to buy the shares. b) If you sell the shares you would receive 110,000 in USD. The buying rate would be used because the seller would have to buy the Euros from the market after merchandising in dollars. because they would receive 110,000/1.4550 = 75601.37 Euros c) The cost of the agent when buying the shares= 100,000 *0.2%= 200 In Euros this cost would be 200/1.4950=133.77 Cost in bucks = 100200 Cost in Euros =67023.409 Cost of the broker commission when selling the shares= 110,000 * 0.2%= 220 In Euros this cost would be= 220/1.4550=151,20, as the investor would buy from Dollars to pay the commission. The total proceeds would be 109,780 USD and 75752.58 Euro. 2 You are the manager of an American pensio n fund and decide, on January 5, to buy ten thousand shares of British Airways listed in London. You sell them on February 5. Here are the quotes that you can use January 5 British Airways share value (?) purchase = 3.50 and selling = 3.52 Exchange rate (dollars per pound) Buying =1.5000 and selling = 1.5040 February 5 British Airways share price (?) Buying = 3.81 and selling 3.83 Exchange rate (dollars per pound) Buying =1.4500 and selling = 1.4540 You must pay the U.K. broker a commission of 0.2% of the transaction value (on the purchase and on the sale). (a) What is your sterling rate of return on the operation? (b) What is your dollar rate of return on the operation? Answers Buying Cost in Pounds 3.5 *10,000 = 35000 ? Buying Cost in USD 35,000 *1.5= 52500 USD equip on Purchase 35000*0.2%=70? Commission on Purchase USD= 70 * 1.5= 105 sales agreement Proceeds in Pounds 3.83*10,000= 38,300 ? Proceeds in USD 38,300 * 1.4540 = 55688.2 Commissions on Sale 38,300 * 0.02% = 76.8 ? Commission on Sale in USD 76.8 *1.4540= 111.37 a) Sterling rate of return Total Investment 35000+ 70= 35070? Total proceeds 38300-76.8= 38376.8 Profit= 3306.8 Return= 9.429% b) Dollar Rate of return Investment in dollars 52500+105=52605 Total Proceeds in USD 55688-111.37= 55576.63 Profit in USD 2971.63 Return 5.648% 3 You are a U.S. investor and respect to buy ten thousand shares of Club Mediterranee (Club Med). You can buy them either in Paris or in London. You ask the brokers to quote you net prices (no commissions paid). There are no taxes on foreign shares listed in London. Here are the quotes London (in ? per share) Buying at 56.75 and selling at 58.125 Paris (in per share) Buying at 78 ? and selling at 78 ? The exchange rates are Dollars per pound buying = 1.9450 and selling = 1.9950 Dollars per euro buying = 1.4850 and selling = 1.4855 What is your total dollar cost if you buy the Club Med shares at the cheaper place? Answers If you buy the shares in London 10,000 * 58.125 = 581250 ? If you buy the shares in Paris 10,000 * 78. 75=787500 Cost in Dollars in London Purchase= 581,250 * 1.9450=11,30,531 USD would be required. The buying price is used because investor would first sell dollars to get the pounds to buy the shares. Cost in USD of Paris Purchase 787500*1.4850=1169437.5 USD The cheaper price to buy the shares would be 11, 30,531 USD. 4 Assume the following quotes ii Mexican peso/USD 9.3850