hi why the answer is c? cn you show me how its calculated?\
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hi why the answer is c? cn you show me how its calculated?\ Suppose the domestic interest rate is 3% and the foreign in...
Question 3 (a) State theuncovered interest rate parity condition. (b) Consider an open economy with a...
Question 3 (a) State theuncovered interest rate parity condition. (b) Consider an open economy with a domestic interest rate of i, 3%, a nominal exchange rate between the domestic and foreign economy of E, =2, and where the foreign interest rate is i2%. In this case according to the "interest rate parity" what is the markets expectation of the future exchange rate E? (c) Consider an open economy with a domestic interest rate of i, 5 %, a nominal exchange...
Define the nominal exchange rate as the foreign price of domestic currency, e.g. the amount of...
Define the nominal exchange rate as the foreign price of domestic currency, e.g. the amount of Yen per dollar. When the interest parity condition holds, we know that the domestic interest rate must be equal to: Group of answer choices the foreign interest rate minus the expected rate of appreciation of the domestic currency. the expected rate of appreciation of the domestic currency. the foreign interest rate. the expected rate of depreciation of the domestic currency. the foreign interest rate...
The nominal exchange rate (E) as defined in the text represents the price of domestic currency...
The nominal exchange rate (E) as defined in the text represents the price of domestic currency in terms of foreign currency. none of the above the number of units of foreign currency you can obtain with one unit of domestic currency. the number of units of domestic goods you can obtain with one unit of foreign goods. both A and C For this question, suppose the domestic interest rate is 4% and that the foreign interest rate is 7%. And...
Question 20 (0.8 points) According to the interest parity condition, if the domestic interest rate is...
Question 20 (0.8 points) According to the interest parity condition, if the domestic interest rate is 12 percent and the foreign interest rate is 10 percent, then the expected appreciation rate of the foreign currency against the domestic currency must be percent (put a negative sign if it is expected to depreciate). Question 21 (0.5 points) If the exchange rate at time t is €1/$. You invest $1 in an euro asset at t, which has an interest of 8%....
can you explain why is 10% 3) Suppose the yen is expected to appreciate by 4%...
can you explain why is 10%
3) Suppose the yen is expected to appreciate by 4% against the pound in one year. If the nominal interest in Japan is 6%, and uncovered interest parity holds, the nominal interest rate in the UK. must be (hint: use the simpler/linear formula) (a) 2%. (b) 5%. (c) 10%.
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
This Question: 2 pts 43 of 50 (32 complete) This Test: 100 pts possible EQuestion Help Suppose that a currency's va...
This Question: 2 pts 43 of 50 (32 complete) This Test: 100 pts possible EQuestion Help Suppose that a currency's value is found to be overvalued by using purchasing power parity. Then OA. the interest rate in the country will change in order to restore purchasing power parity B. the currency will depreciate in the future but we don't know when. C. the currency will appreciate in the future but we don't know when. D. we know when and how...
5. Suppose the interest rate in the US is 2% and the interest rate in Russia...
5. Suppose the interest rate in the US is 2% and the interest rate in Russia is 15%. In a year investors expect the exchange rate to be at Ep = 0.016. Suppose the UIP holds. What is the exchange rate today? 6. Exchange rates and shocks. Using the UIP expression you obtained answer the following questions: (a) Suppose the Central Bank of Russia announces its intentions to raise the interest rate. What will happen to Esp? Will the ruble...
Suppose the world real interest rate is r* = 3%, the gdp growth rates in the...
Suppose the world real interest rate is r* = 3%, the gdp growth rates in the US and the foreign country are 6%, US monetary growth is μUS = 10%, and foreign monetary growth is μFC = 50%. Find inflation rates in both countries, πUS and πFC, nominal interest rates in both countries, iUS and iFC, and the rate of change in the foreign currency value of the $, ΔE/E. Assume the money demand parameter L is constant in both...
1. If the foreign interest rate is 15%, the current exchange rate is 10 and the...
1. If the foreign interest rate is 15%, the current exchange rate is 10 and the expected future exchange rate is 11, what is the domestic interest rate according to the interest parity condition? a. 25% b. 14% c. 11% d. 10% e. 5% 2. If the foreign interest rate is 5%, the current exchange rate is 4 and the domestic interest rate is 10%, what is the expected future exchange rate according to the interest parity condition? a. 4.0...
Question 3 (a) State theuncovered interest rate parity condition. (b) Consider an open economy with a domestic interest rate of i, 3%, a nominal exchange rate between the domestic and foreign economy of E, =2, and where the foreign interest rate is i2%. In this case according to the "interest rate parity" what is the markets expectation of the future exchange rate E? (c) Consider an open economy with a domestic interest rate of i, 5 %, a nominal exchange...
The nominal exchange rate (E) as defined in the text represents the price of domestic currency in terms of foreign currency. none of the above the number of units of foreign currency you can obtain with one unit of domestic currency. the number of units of domestic goods you can obtain with one unit of foreign goods. both A and C For this question, suppose the domestic interest rate is 4% and that the foreign interest rate is 7%. And...
Question 20 (0.8 points) According to the interest parity condition, if the domestic interest rate is 12 percent and the foreign interest rate is 10 percent, then the expected appreciation rate of the foreign currency against the domestic currency must be percent (put a negative sign if it is expected to depreciate). Question 21 (0.5 points) If the exchange rate at time t is €1/$. You invest $1 in an euro asset at t, which has an interest of 8%....
can you explain why is 10%
3) Suppose the yen is expected to appreciate by 4% against the pound in one year. If the nominal interest in Japan is 6%, and uncovered interest parity holds, the nominal interest rate in the UK. must be (hint: use the simpler/linear formula) (a) 2%. (b) 5%. (c) 10%.
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
This Question: 2 pts 43 of 50 (32 complete) This Test: 100 pts possible EQuestion Help Suppose that a currency's value is found to be overvalued by using purchasing power parity. Then OA. the interest rate in the country will change in order to restore purchasing power parity B. the currency will depreciate in the future but we don't know when. C. the currency will appreciate in the future but we don't know when. D. we know when and how...
5. Suppose the interest rate in the US is 2% and the interest rate in Russia is 15%. In a year investors expect the exchange rate to be at Ep = 0.016. Suppose the UIP holds. What is the exchange rate today? 6. Exchange rates and shocks. Using the UIP expression you obtained answer the following questions: (a) Suppose the Central Bank of Russia announces its intentions to raise the interest rate. What will happen to Esp? Will the ruble...
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