Professional Documents
Culture Documents
2021
EXAM RULES!!!
The students should upload their answer files into AYBUZEM until 14:50pm.
The students can upload any file (JPEG, PDF etc.). There is no page limit.
1) (30 pt) Suppose that an MNC wants to assess its transaction exposure. The projected cash flows of the
MNC are as follows for the following year:
Current Exchange
Currency Total Inflow Total Outflow Rate in U.S. Dollars
Polish Zloty (PLN) PLN5,000,000 PLN9,000,000 $0.27
British Pound (£) £3,000,000 £2,000,000 $1.37
2) (40 pt) Assume that the three-year annualized interest rate in the United States is 7 percent and the
three-year annualized interest rate in United Kingdom is 5 percent. Assume interest rate parity holds for a
three-year horizon. Assume that the spot rate of the British pound is $1.37. If the forward rate is used to
forecast exchange rates, what will be the forecast for the British pound’s spot rate in three years? What
percentage appreciation or depreciation does this forecast imply over the three-year period?
3) (30 pt) How can a central bank use a) direct intervention b) indirect intervention to change the value of
a currency? Explain.
Good Luck!
Prof. Dr. Nildağ Başak Ceylan