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5. Suppose the interest rate in the US is 2% and the interest rate in Russia...
You are a US investor. The US interest rate is 5% while the Euro interest rate...
You are a US investor. The US interest rate is 5% while the Euro interest rate is 4.2%. With a current spot exchange rate E$/€=1.25 and an expected exchange rate of E e $/€=1.08. a. Is dollar expected to appreciate or depreciate (against euro)? Explain. b. Does UIP hold true here? Explain. c. Which type of deposit is more attractive? Dollar deposit, euro deposit, or no difference? Explain. please show all work
If the US interest rate is close to zero, while the interest rate of Russia is...
If the US interest rate is close to zero, while the interest rate of Russia is very high, what would interest rate parity suggest about the forward rate of the Russian ruble? Explain.
If the interest rate in the US is 6% and in the UK is 5% and...
If the interest rate in the US is 6% and in the UK is 5% and interest rate parity (IRP) holds, is the forward premium for the dollar per pound positive or negative? Does the market expect the dollar to depreciate or appreciate relative to the pound?
1. Suppose the dollar-euro exchange rate, Esle, are as follows: in New York, $1.2 per euro;...
1. Suppose the dollar-euro exchange rate, Esle, are as follows: in New York, $1.2 per euro; and in Paris, $1.3 per euro. (10 pts) a. Describe how investors use arbitrage to take advantage of the difference in exchange rates. (5 pts) b. Will this make euros appreciate or depreciate (against dollars) in Paris? Will this make euros appreciate or depreciate (against dollars) in New York? Under what conditions will the equilibrium be restored? Explain. (5 pts)
If the interest rate in the U.S. is expected to be 5 percent for the next...
If the interest rate in the U.S. is expected to be 5 percent for the next year. The interest rate in the U.K. is expected to be 8 percent for the next year. Uncovered IRP suggests that the: Multiple Choice O U.S. dollar should depreciate against the pound by about 3 percent. O British pound should depreciate against the dollar and the dollar should appreciate against the pound, both by about 3 percent O British pound is should appreciate against...
hi why the answer is c? cn you show me how its calculated?\ Suppose the domestic interest rate is 3% and the foreign in...
hi why the answer is c? cn you show me how its calculated?\
Suppose the domestic interest rate is 3% and the foreign interest rate is 2%. If uncovered interest parity holds, by how much is the domestic currency expected to appreciate or depreciate against the foreign currency? a) The domestic currency is expected to appreciate by 1% b) The domestic currency is expected to appreciate by 2%. c) The domestic currency is expected to depreciate by 1% d) The...
2. Suppose the average interest rate on euro bonds is 4%, and the average interest rate...
2. Suppose the average interest rate on euro bonds is 4%, and the average interest rate on U.S. dollar bonds is 6%. Which should the investor choose? (a) neither, because bonds have high default rates. (b) both, an investor will choose some euro bonds and some U.S. bonds to diversify. (c) the euro bond, because their economies are usually more stable. (d) It is not possible to answer without information on exchange rates. 3. If the U.S. interest rate is...
13) Suppose the interest rate in Canada falls and the interest rate in Japan remains the...
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
Short-answer questions 1. Here are some statistics: Inflation Exchange Rates Current Last Year 5 US Japan...
Short-answer questions 1. Here are some statistics: Inflation Exchange Rates Current Last Year 5 US Japan Mexico Ey/$ 95 Epeso/$ 10.5 100 10 5 (a) List the countries in order of real appreciation (largest appreciation first) relative to the dollar. (b) Taking Last Year's exchange rate as given, what should be the current exchange rate to ensure PPP? (c) Suppose that the movement in the exchange rates were anticipated. According to the UIP, what is the interest rate differential in...
Asset market: Suppose the Canadian dollar interest rate (RCAD) is higher than the expected rate of...
Asset market: Suppose the Canadian dollar interest rate (RCAD) is higher than the expected rate of return on US dollar deposits (ERORUSD). Will the Canadian dollar appreciate depreciate relative to the US dollar? Explain why.
1. Suppose the dollar-euro exchange rate, Esle, are as follows: in New York, $1.2 per euro; and in Paris, $1.3 per euro. (10 pts) a. Describe how investors use arbitrage to take advantage of the difference in exchange rates. (5 pts) b. Will this make euros appreciate or depreciate (against dollars) in Paris? Will this make euros appreciate or depreciate (against dollars) in New York? Under what conditions will the equilibrium be restored? Explain. (5 pts)
If the interest rate in the U.S. is expected to be 5 percent for the next year. The interest rate in the U.K. is expected to be 8 percent for the next year. Uncovered IRP suggests that the: Multiple Choice O U.S. dollar should depreciate against the pound by about 3 percent. O British pound should depreciate against the dollar and the dollar should appreciate against the pound, both by about 3 percent O British pound is should appreciate against...
hi why the answer is c? cn you show me how its calculated?\
Suppose the domestic interest rate is 3% and the foreign interest rate is 2%. If uncovered interest parity holds, by how much is the domestic currency expected to appreciate or depreciate against the foreign currency? a) The domestic currency is expected to appreciate by 1% b) The domestic currency is expected to appreciate by 2%. c) The domestic currency is expected to depreciate by 1% d) The...
2. Suppose the average interest rate on euro bonds is 4%, and the average interest rate on U.S. dollar bonds is 6%. Which should the investor choose? (a) neither, because bonds have high default rates. (b) both, an investor will choose some euro bonds and some U.S. bonds to diversify. (c) the euro bond, because their economies are usually more stable. (d) It is not possible to answer without information on exchange rates. 3. If the U.S. interest rate is...
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
Short-answer questions 1. Here are some statistics: Inflation Exchange Rates Current Last Year 5 US Japan Mexico Ey/$ 95 Epeso/$ 10.5 100 10 5 (a) List the countries in order of real appreciation (largest appreciation first) relative to the dollar. (b) Taking Last Year's exchange rate as given, what should be the current exchange rate to ensure PPP? (c) Suppose that the movement in the exchange rates were anticipated. According to the UIP, what is the interest rate differential in...
Asset market: Suppose the Canadian dollar interest rate (RCAD) is higher than the expected rate of return on US dollar deposits (ERORUSD). Will the Canadian dollar appreciate depreciate relative to the US dollar? Explain why.
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