Problem Set 10-1

FORUM

1. Use the exchange rate data in the table to answer the following questions. The first two exchange rates are the spot rates on those dates. The third exchange rate is the one year forward exchange rate as of February 2004.

	Feb 4, 2003	Feb 4 2004	Forward Feb 4 2005
US-Europe	1.08 $/Euro	1.25 $/Euro	1.24 $/Euro
US-S. Africa	8.55 Rand/$	6.95 Rand/$	7.42 Rand/$

A) Calculate the rate of change of the euro value relative to the dollar between 2003 and 2004.

B) Calculate the rate of change in the dollar value relative to the euro between 2003 and 2004.

C) Calculate the rate of change in the dollar value relative to the South African rand between 2003 and 2004.

D) Calculate the expected change in the dollar value relative to the euro between 2004 and 2005.

E) Calculate the expected change in the dollar value relative to the rand between 2004 and 2005.