3、Renaud Blanc Case Scenario Renaud Blanc is an analyst in the risk management department of De Luca Corporation, a U.S. company that processes fruit and vegetables bought on the world market. Production and sales of packaged fruit juices and condiments occur in the United States, South America, and Europe. Blanc is responsible for making assessments of the relative strength of the U.S. dollar against other relevant currencies. Blanc knows that relative rates of inflation will influence the dollar value of a currency, so he forecasts inflation for the United States and its trading partners. De Luca buys fruit from Brazil. For the coming year Blanc forecasts annual U.S. inflation of 2% and annual Brazilian inflation of 10%. The current exchange rate is BRL3/USD (BRL = Brazilian real, USD = U.S. dollar). The one-year risk-free interest rates in the United States and Brazil are 2.25% and 18%, respectively. One of Blanc’s colleagues, Paula Smith, makes the following statements: 1."The theory of uncovered interest rate parity allows me to calculate E(S1)/S0 as being equal to the ratio of "one plus the one-year Brazilian interest rate” to "one plus the one-year U.S. interest rate,” when the expected ending exchange rate, E(S1), and the beginning of period exchange rate, S0, are quoted as BRL/USD.” 2."Exchange rate risk reduces to inflation uncertainty if all parity relationships hold perfectly.” Smith questions Blanc about whether forward markets for the Brazilian real give any indication about the expected exchange rate in one year. Blanc responds: "If the forward rate equals the expected spot rate, then using forward currency contracts to hedge exchange risk would be costless (aside from commissions) in terms of the expected dollar price that De Luca would pay for fruit in Brazil.” De Luca also purchases fruit and packaging materials in Europe. Blanc is considering various ways to hedge against the cost of future material purchases in Europe. For the coming year, he forecasts annual inflation of 4% for Europe and 2% for the United States. He believes that uncovered and covered interest parity hold for the United States and Europe. Question 1 Based on purchasing power parity, Blanc's estimate of the exchange rate (BRL / USD) in one year should be closest to: A. 2.60. B. 2.78. C. 3.24. D. 3.46.
Question 2 Based on interest rate parity, Blanc's estimate of the one-year forward exchange rate for the Brazilian real (BRL / USD) should be closest to: A. 2.60. B. 2.78. C. 3.47. D. 3.62.
Question 3 Is Smith's statement about the theory of uncovered interest rate parity correct? A. Yes. B. No, because the relationship is covered interest parity. C. No, because the relationship is relative purchasing power parity. D. No, because the relationship is absolute purchasing power parity.
Question 4 Blanc's best response to Smith's statement about exchange rate risk is that the statement is: A. correct. B. incorrect, because exchange rate risk reduces to real rate uncertainty. C. incorrect, because exchange rate risk reduces to interest rate uncertainty. D. incorrect, because exchange rate risk is eliminated if all parity relationships hold. Question 5 Is Blanc's response to Smith about the forward rate and using forward currency contracts correct? A. Yes. B. No, because uncovered interest parity must also hold. C. No, because the international Fisher effect must also hold. D. No, because relative purchasing power parity must also hold. | 
发表于 2008-5-20 14:55
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