Let the exchange rate at the time of investment be x NGN/MWK be x
Purchase value in terms of naira=100000*x NGN
Exchange rate after 1 year=x*(1-4%)=0.96 NGN/MWK
Sale value in terms of naira=106000*0.96x NGN
Nominal rate of return=(106000*0.96x-100000x)/(100000x)=1.76%
So, Given statement is false
True or False? Nigeria's currency is the naira (NGN); Malawi's currency is the kwacha (MWK). The...
Book: Global Business Today (9th Edition), by Charles W.L. Hill and G. Tomas M. Hult. Ch. 11 Case Study (pg 334): Currency Trouble in Malawi Currency Trouble in Malawi Closing Case (Question below article) When the former World Bank economist Bingu wa Mutharika became president of the East African nation of Malawi in 2004, it seemed to be the beginning of a new age for one of the world's poorest countries. In landlocked Malawi, most of the population subsists on...
True/False/Explain. The annual interest rate on South Korean won currency deposits is 4%, the current won/dollar exchange rate is W1100/$1 and the expected future won/dollar exchange rate is W1089/$1. For the foreign exchange market to be in equilibrium, the interest rate on U.S. dollar currency deposits must be 3%.
True/False/Explain (show algebraically): If the interest rate on Australian $ deposits is 3.5 percent, the interest rate on British pound (£) deposits is 4.5 percent, and expected A$ appreciation against the £ is 1 percent, an investor should invest in £ deposits.
True/False/Explain (show algebraically): If the interest rate on Angolan Kwanza (Kz) deposits is 3.0 percent, the interest rate on British pound (£) deposits is 2.2 percent, and expected £ appreciation against the Kz is 1.1 percent, an investor should invest in British pound deposits.
Several factors affect the exchange rate of a currency with another currency. Which of the following statements are true about the factors that have an impact on exchange rates? Check all that apply. When a government limits imports and restricts foreign exchange transactions, its currency's value tends to increase relative to other currencies. An increase in inflation tends to increase the currency's value with respect to other currencies with lower inflation. If a government intends to prevent its currency's value...
Using the information in this chapter, label each of the following statements true, false, or uncertain. Explain briefly. IF YOU ARE NOT GONNA ANSWER ALL OF THEM ABSTAIN FROM COMMENTING HERE. THANKS a.If the nominal exchange rate is fixed, the real exchange rate is fixed. b. When domestic inflation equals foreign inflation, the real exchange rate is fixed. c. A devaluation is an increase in the nominal exchange rate. d. Britain’s return to the gold standard caused years of high...
Problem 1.(20 points) Which of the following statements are true? Which are false? Explain (for each statement) To prevent an appreciation of the Swiss Franc, the Swiss National Banks can sell foreign currency reserves in exchange for Swiss Francs. According to the monetary approach, an increase in domestic GDP growth rate will lead to a domestic currency depreciation. Monetary approach to determining exchange rates is more suitable for the short run analysis, rather than analysis on long horizons. Central banks...
5. Interest rate parity Aa Aa The rise of globalization is due to the many companies that have become multinational corporations for various reasons-for example, to access better technology, to enter new markets, to obtain more raw materials, to find funding resources, to minimize production costs, or to diversify business risk. This multimarket presence exposes companies to different kinds of risk as well-for example, political risk and exchange rate risk. Several factors affect the exchange rate of a currency with...
4. Interest rate parity The rise of globalization is due to the many companies that have become multinational corporations for various reasons-for example, to access better technology, to enter new markets, to obtain more raw materials, to find funding resources, to minimize production costs, or to diversify business risk. This multimarket presence exposes companies to different kinds of risk as well-for example, political risk and exchange rate risk. The relationship between interest rates and exchange rates can be represented through...
27. If the U.S. government takes the value of in-kind transfers into consideration, the U.S. poverty rate decreases. True False 29. The balance of payments is the domestic price of a foreign currency. True False 30. The inequality trap has a negative impact on human capital development. True False 31. According to Rostow's stages of economic development, poor nations must increase their farm productivity so that some workers can leave farming and move into other industries. True False 32. The...