Which of the following is not true of the currency exchange pricing mechanism? a) Purchasing power...
Which of the following is not true of the currency exchange pricing mechanism? a) Purchasing power and interest rate parity conditions are always met. b) a “fair” forward price can be calculated using the spot rate for the two currencies in question and a corporation’s cost of short term borrowing and short term investment returns. c) The “fair” value referred to in “b” is the benchmark for evaluating arbitrage opportunities. d) Forward pricing drives the value of currency derivative instruments.
Homework Answers
Option 'A' is not true
Purchasing power and interest rate parity conditions will not meet.
Purchasing power parity that compares different countries currencies. and measures prices at different locations. Purchasing power parity produces an exchange rate equals the price of the product at one location with price at another location.
Interest rate parity tells interest rate differential between two countries is equal to the differential between the forward exchange rate/
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Which of the following is not true of the currency exchange
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Can anyone answer the question and explain thx alot
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Challenge Problem. Following are currency exchange “crossrates”
between pairs of major currencies. Currency crossrates include both
direct and indirect methods for expressing relative exchange rates.
Currency crossrates include both direct and indirect methods for
expressing relative exchange rates.
U.S. U.K. Swiss Japanese European
Dollar Pound Franc Yen Euro
EMU 1.1406 ? 0.6783 0.0087 ---
Japan 130.66 185.98 77.705 --- 114.60
Switzerland 1.6817 2.3936 --- 0.0129 ?
United
Kingdom ? --- 0.4178 ? 0.6162
United
States --- 1.4231 ? 0.0077 0.8767
a. Fill in the missing exchange rates in
the crossrates table.
b. If the inflation rate is expected to be
3 percent in the European Monetary Union
(EMU) and 4 percent in...
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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...
Can anyone answer the question and explain thx alot
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Challenge Problem. Following are currency exchange “crossrates”
between pairs of major currencies. Currency crossrates include both
direct and indirect methods for expressing relative exchange rates.
Currency crossrates include both direct and indirect methods for
expressing relative exchange rates.
U.S. U.K. Swiss Japanese European
Dollar Pound Franc Yen Euro
EMU 1.1406 ? 0.6783 0.0087 ---
Japan 130.66 185.98 77.705 --- 114.60
Switzerland 1.6817 2.3936 --- 0.0129 ?
United
Kingdom ? --- 0.4178 ? 0.6162
United
States --- 1.4231 ? 0.0077 0.8767
a. Fill in the missing exchange rates in
the crossrates table.
b. If the inflation rate is expected to be
3 percent in the European Monetary Union
(EMU) and 4 percent in...
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