Homework Answers
When exchange rate is higher than the target rate,the fed sells dollars.
At a higher exchange rate the demand for dollar is less than the supply of dollar.Raising the supply of dollar by selling dollars would shift the supply curve of dollars to the right,reducing the interest rate.
Answer-C
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TQuestion: 1 pt If the current exchange rate is higher than the Fed's target exchange rate,...
If the current exchange rate is higher than the Fed's target exchange rate, the Fed would O A. implement interest r...
If the current exchange rate is higher than the Fed's target exchange rate, the Fed would O A. implement interest rate parity. O B. buy dollars. O C. sell dollars. OD. implement purchasing power parity. Click to select your answer.
If the interest is above the Fed's target, the Fed should a. Buy bonds to increase...
If the interest is above the Fed's target, the Fed should a. Buy bonds to increase bank reserves b. Buy bonds to decrease bank reserves c. Sell bonds to increase bank reserves d. Sell bonds to decrease bank reserves
4. According to purchasing power-parity, if the dollar price of oil is higher in Toronto than...
4. According to purchasing power-parity, if the dollar price of oil is higher in Toronto than oil in Toronto and oil in London to drive _ the price of oil in Toronto. A) buy; sell; up B) buy, sell, down C) sell; buy, up D) sell; buy, down
When the Fed sells government securities to a bank, how are the Fed's assets affected? OA....
When the Fed sells government securities to a bank, how are the Fed's assets affected? OA. The amount of reserves held at the Fed decreases B. The amount of reserves held at the Fed increases C. The amount of the Fed's government securities increases D. The amount of the Fed's government securities decreases. Click to select your answer.
This Question: 1 pt Explain the Fed's pelicy tools and briefly describe how each works The...
This Question: 1 pt Explain the Fed's pelicy tools and briefly describe how each works The Fed uses ks pelicy tools to O A. infuence the exchange rabe and the country's trade balance by adjusting the interest rate B. infuence the interes rate and regaulate the amount of money ciculaing in the Unind States by adjusting the reserves of the banking system egulate the amount of money droulating in the United States by printing enough money each year for the...
9) Suppose today that US nominal interest rate = 1% and German nominal interest rate =...
9) Suppose today that US nominal interest rate = 1% and German nominal interest rate = 6% and the current nominal exchange rate is E = €0.50/$. a. Use the uncovered interest party equation to compute the expected rate of appreciation of the US$ relative to the Euro. (Approximate form of the equation is fine.) b. Given your answer to a, what the expected future exchange rate? c. If you expect the US$ to depreciate relative to the Euro which...
1. If the foreign interest rate is 15%, the current exchange rate is 10 and the...
1. If the foreign interest rate is 15%, the current exchange rate is 10 and the expected future exchange rate is 11, what is the domestic interest rate according to the interest parity condition? a. 25% b. 14% c. 11% d. 10% e. 5% 2. If the foreign interest rate is 5%, the current exchange rate is 4 and the domestic interest rate is 10%, what is the expected future exchange rate according to the interest parity condition? a. 4.0...
Under a fixed exchange rate regime, if there is a 25 percent chance a 25% devaluation...
Under a fixed exchange rate regime, if there is a 25 percent chance a 25% devaluation will occur in a months time, the financial markets will hold domestic bonds only if the central banks set: A.a monthly interest rate 6.25% lower than before. B.a monthly interest rate 25% higher than before. C.an annual interest rate 25% lower than before. D.an annual interest rate 75% higher than before. In a fixed exchange rate regime, expectations that a devaluation may be coming...
5. Suppose the current spot exchange rate is $1.17 to €1. The dollar is expected to...
5. Suppose the current spot exchange rate is $1.17 to €1. The dollar is expected to appreciate to $1.11 to €1 during the next year. (Assume inflation and risk etc. are the same between the Eurozone and the U.S.) (a) What is the expected currency appreciation gain for the dollar? (Give this as a percentage and round to the nearest 0.1%.) (b) Suppose the interest rate on 1-year corporate bonds in the U.S. is 4%. What is the expected total...
1. A HIGHER/ LOWER OR SAME 2. DECREASES. APPRECIATES 3. DECREASES. APPRECIATES 4. Multinational Financial Management:...
1. A HIGHER/ LOWER OR SAME
2. DECREASES. APPRECIATES
3. DECREASES. APPRECIATES
4.
Multinational Financial Management: Interest Rate Parity The general relationship between spot and forward exchange rates is specified by a concept called interest rate parity. It specifies that investors should expect to earn (-Select- return in all countries after adjusting for risk. The relationship is expressed in the following equation: Forward exchange rate – 1+th Spot exchange rate 1+rf Both the forward and spot rates are expressed in...
If the current exchange rate is higher than the Fed's target exchange rate, the Fed would O A. implement interest rate parity. O B. buy dollars. O C. sell dollars. OD. implement purchasing power parity. Click to select your answer.
4. According to purchasing power-parity, if the dollar price of oil is higher in Toronto than oil in Toronto and oil in London to drive _ the price of oil in Toronto. A) buy; sell; up B) buy, sell, down C) sell; buy, up D) sell; buy, down
When the Fed sells government securities to a bank, how are the Fed's assets affected? OA. The amount of reserves held at the Fed decreases B. The amount of reserves held at the Fed increases C. The amount of the Fed's government securities increases D. The amount of the Fed's government securities decreases. Click to select your answer.
This Question: 1 pt Explain the Fed's pelicy tools and briefly describe how each works The Fed uses ks pelicy tools to O A. infuence the exchange rabe and the country's trade balance by adjusting the interest rate B. infuence the interes rate and regaulate the amount of money ciculaing in the Unind States by adjusting the reserves of the banking system egulate the amount of money droulating in the United States by printing enough money each year for the...
9) Suppose today that US nominal interest rate = 1% and German nominal interest rate = 6% and the current nominal exchange rate is E = €0.50/$. a. Use the uncovered interest party equation to compute the expected rate of appreciation of the US$ relative to the Euro. (Approximate form of the equation is fine.) b. Given your answer to a, what the expected future exchange rate? c. If you expect the US$ to depreciate relative to the Euro which...
1. A HIGHER/ LOWER OR SAME
2. DECREASES. APPRECIATES
3. DECREASES. APPRECIATES
4.
Multinational Financial Management: Interest Rate Parity The general relationship between spot and forward exchange rates is specified by a concept called interest rate parity. It specifies that investors should expect to earn (-Select- return in all countries after adjusting for risk. The relationship is expressed in the following equation: Forward exchange rate – 1+th Spot exchange rate 1+rf Both the forward and spot rates are expressed in...
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