1) Suppose that a BMW costs E 45,000 in Germany and that the current USD/EUR exchange rate is 

    .7624.  Calculate the dollar price of the BMW.

        EUR/USD  = 1.2500 ($/Euro)

        USD/CAD = 1.1000 (CAD/$)

        EUR/CAD =  1.3550 (CAD/Euro)

      How could you use this information to make money in the currency markets? 

3) Suppose that you took a short position on 12,500,000 Japanese Yen future (remember, a short 

    position involves selling Yen) at a price of 104.5 Yen/$.  If the spot rate on the contract's expiration date 

    was 103.45 Yen/$, calculate your profit/loss from the futures contract. 

4)   Consider the following balance of payments data. (in billions of dollars)

Merchandise Exports	$100
Merchandise Imports	$125
Service Imports	$90
Service Exports	$80
Income received from abroad	$110
Income payments to foreigners	$150
Increase in US ownership of private assets abroad	$160
Increase in foreign ownership of private US assets	$200
Increase in home official reserve assets	$30
Increase in foreign official assets in US	$35

Assuming that unilateral transfers are zero, find the trade balance, the current account balance, 

the capital and financial accounts balance, the Balance of Payments, and the statistical discrepancy.

 

5) .  Suppose that the U.S. sells F-16 fighter planes to the Israeli government.  Explain how this transaction creates 

        offsetting credits and debits in the Balance of Payments accounts.