Solved by verified expert:finance assignment need to use the bloomberg database to do it. his assignment is worth 20% of your grade. The assignment must be typed and accompanied by a signature page with the names and signatures of each member of the group. A group member without a signature will not earn any grade from that assignment. No late submissions will be accepted.
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Final Assignment
This assignment is worth 20% of your grade. It must be submitted, in hard copy, during
our last class on May 4, Friday. It is a group assignment based on the group you currently
have for the news analysis & presentation assignment. The assignment must be typed
and accompanied by a signature page with the names and signatures of each member of
the group. A group member without a signature will not earn any grade from that
assignment. No late submissions will be accepted.
– THE FINAL ASSIGNMENT –
For this assignment you need to use the Bloomberg Database In order to be able to
work on the Bloomberg terminal, please refer to the document titled
“Bloomberg_Workshop_Material” uploaded on the Blackboard.
Part 1:
1) From Bloomberg, download the exchange rates of 6 foreign currencies (at least 2 of
them have to be from emerging markets) including the dollar.
2) Compute the one-year appreciation or depreciation against the dollar
(Hint: Remember, ($: U.S dollar, X: The foreign currency that you have chosen)
St(X/$) = Beginning Rate
St+1(X/$) = Ending Rate
The % appreciation (or depreciation) in X can be calculated as;
[(Ending Rate – Beginning Rate) / Beginning Rate] x 100
3) Explore recent exchange rate trends for the pairs of countries that you have selected
(the time window depends on your choice, the wider the better). To plot trends, download
the series to a spreadsheet.
4) Try to plot examples of some fixed and floating rates. Can you tell from the data, which
countries are fixed and which are floating?
5) In the plots, can you locate data for an exchange rate crisis within your time-window?
Part 2:
Imagine you are a carry trader. Obtain one-month Swap rates for some major currencies:
US dollar, pound, euro, Japanese yen, Swiss franc, Canadian dollar, and Austrian dollar
(Hint: Google “ft.com money rates”). Find the lowest yield currency and call it X. How much
interest would you pay in X units after borrowing X 1,000,000 for one month? (Hint: The
raw data are annualized rates.) Compute the exchange rate between X and every other
high yield currency Y. For each Y, compute how much X would be worth in Y units today,
and then in a month’s time with Y-currency interest added. Revisit this question in a
1
month’s time, find the spot rates at the moment, and compute the resulting profit from
each carry trade. Did any of your imaginary trade pay off?
2
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