Homework Answers
Since Japanese inflation is lower than Aus inflation , hence AUS
dollar depreciates and as per International fischer effect
depreciation is by AUD inflation rate -JPY inflation rate =7%-2%
=5%
Option a is correct option
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This question is based on the following information: PAUD = 7%, iJPY= 2% [i=nominal interest rate;...
Question 32 1 pts Assume the US government security with 1 year maturity (nominal interest rate)...
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The International Fisher Effect (IFE), Purchasing Power Parity (PPP) and Interest Rate Parity (IRP) are three...
The International Fisher Effect (IFE), Purchasing Power Parity (PPP) and Interest Rate Parity (IRP) are three very important theories in international finance, each with its own predictions and implication. Which of the following is correct? IRP suggests that a change in interest rate differential will not change the currency's forward premium/discount. According to purchasing power parity (PPP), if a foreign country's inflation rate is below the inflation rate at home, home country consumers will increase their imports from the foreign...
Country Nominal rate Exchange Rate Forward differential Inflation rate EUR GBP Differential: Based on the information...
Country Nominal rate Exchange Rate Forward differential Inflation rate EUR GBP Differential: Based on the information contained in the table above, the parity condition marked "d" is known as the Generalized Fisher Effect Interest Rate Parity International Fisher Effect Relative version of the Purchasing Power Parity
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1.) $802, $902, $1,002, $1,202 2.) increases/decreases 3.) depreciates/appreciates 6. Pricing foreign goods The nominal exchange...
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to 39) According to the international Fisher Effect, if an investor purchases a five-year U.S. bond...
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Question 32 1 pts Assume the US government security with 1 year maturity (nominal interest rate) is 2% and Japanese government security with 1 year maturity is 1%. Regardless of the current exchange rate (US$ as a base), if you apply the International Fisher Effect to predict the exchange rate, Yen will against US$. O depreciate O appreciate ourses/6407/quizzes/214422/take D Question 31 1 pts Assume the BigMac is sold at US$5 in US and 3 Euro in Germany. Let's assume...
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9. What is the most commonly used method to s e most commonly used method to settle a futures contract? A) The futures contract buyer delivery of the underlying asset. B) The futures contract seller usu contract buyer usually holds the contract to the maturity date and takes the es contract seller usually holds the contract to the maturity date and makes me delivery of the underlying asset to the counterpart. utures contract traders usually offset their initial futures positions...
13) Suppose the interest rate in Canada falls and the interest rate in Japan remains the same. Interest rate parity implies that given equal risk A) the inflation rate is higher in Japan. B) Japanese financial investments are more profitable. C) the yen is expected to depreciate against the dollar. D) the yen is expected to appreciate against the dollar E) Canadian financial investments are less profitable. Answer: 0
The International Fisher Effect (IFE), Purchasing Power Parity (PPP) and Interest Rate Parity (IRP) are three very important theories in international finance, each with its own predictions and implication. Which of the following is correct? IRP suggests that a change in interest rate differential will not change the currency's forward premium/discount. According to purchasing power parity (PPP), if a foreign country's inflation rate is below the inflation rate at home, home country consumers will increase their imports from the foreign...
Country Nominal rate Exchange Rate Forward differential Inflation rate EUR GBP Differential: Based on the information contained in the table above, the parity condition marked "d" is known as the Generalized Fisher Effect Interest Rate Parity International Fisher Effect Relative version of the Purchasing Power Parity
1.) $802, $902, $1,002, $1,202
2.) increases/decreases
3.) depreciates/appreciates
6. Pricing foreign goods The nominal exchange rate is the price of one currency in terms of another currency. A nominal exchange rate speofies how many units of one country's currency are needed to buy one unit of another country's currency. Suppose the following table presents nominal exchange rate data for November 26, 2014, in terms of U.5. dollars per unit of foreign curreno, Ue the information in the table to...
27. The interest rate in the U.K. is 7%, while the interest rate in the U.S. is 5%. The spot rate for the British pound is $1.50. According to the international Fisher effect (IFE), the British pound should adjust to a new level of:
to 39) According to the international Fisher Effect, if an investor purchases a five-year U.S. bond that has an annual interest rate of 5% rather than a comparable British bond that has an annual interest rate of 6%, then the investor must be expecting the at a rate of at least 1% per year over the next 5 years. A) British pound; appreciate B) British pound; revalue C) U.S. dollar; appreciate D) U.S. dollar, depreciate
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