Master_Key_Economics.pdf_page-0085

Question If the exchange rate is such that $1 equals 5 euros, then the price of a euro is Answer a. $5 b. $1 c. $0.40 d. $0.20

Please no hand writing solution

QUESTION 5 A currency speculator wants to speculate on the future movements of the E. The speculator expects the € to appreciate in the near future and decides to concentrate on the nearby contract. The broker requires a 2% Initial Margin (IM) and the Maintenance Margin (MM) is 75% of IM. Following € Futures quotes are currently available from the Chicago Mercantile Exchange (CME). Euro (CME)-€125,000; $/€ Low Settle Change Open Interest 1.2175 1.2259 -0.0018 255,420 1.2189 1.2269 -0.0018 19,335 Compute the Initial Margin (IM) amount in the Margin Account. Open High June 1.2216 1.2276 Sept 1.2229 1.2288 ⒸA $3,087.96 OB. $3,057,25 OC. $3,064.75 D.$3,054.00

QUESTION 1 Currently, $1 will buy C$1.2103 while $1.2762 will buy €1. What is the exchange rate between the Canadian dollar and the euro? O C$1= €0.6474 C$1= €0.6539 C$1= €1.2762 C$1.5446 €1 C$1.5528 €1

(a) (b) (c) Question 2 London foreign exchange market exchange rate spot rate three-month forward American 1.8620--1.8640 30-60 points Q: how much is three-month forward dollar real exchange rate ? London foreign exchange market exchange rate three-month forward spot rate American 1.8620--1.8640 80 --- 30 points Q: how much is three-month forward dollar real exchange rate ? London foreign exchange market exchange rate three-month forward spot rate American 1.8620-1.8640 40 --- 70 points Q: how much is three-month forward dollar real exchange rate ?

6. Purchasing power parity Aa Aa The law of one price The theory of purchasing power parity (PPP) states that in the long-run exchange rates between two countries adjusts so that the price of an identical good is the same when expressed in the same currency. A scanner costs £65.45 in England. The spot rate is currently $1.9472 per pound. Assuming that PPP holds true, what is the price of the scanner D u NTO in the United States? 30378 $127.44 $38.65 $33.61 48330378 $101.95 ONFDD AR Suppose the price of the scanner in the United States was actually $140.18. Assuming no transaction costs, transportation costs, or import restrictions, what does PPP predict would happen to the demand for the scanner in the United States? The demand for the scanner would decrease in the United States. The demand for the scanner would increase in the United States.

A foward exchange transactions involve ____________ exchange of foreign currencies at  ________ rate.   Question 21 options:   1)  immediate, predetermined   2)  immediate, spot   3)  future, predetermined   4)  future, spot

Problem 4. Use the following spot and forward bid-ask rates for the U.S. dollar/euro (USS/€) exchange rate from December 10, 2010, toanswer the following questions: images below

QUESTION 8 Which of these statements is not true? OA. The forward exchange rate is a good predictor of the future spot exchange rate. B. The forward exchange rate and the future spot rate may not be the same. OC. The forward exchange rate is an unbiased predictor of the future exchange rate. OD. The spot exchange rate is a good predictor of the future exchange rate. OE. All of the above. QUESTION 9 Suppose the Australian dollar substantially depreciates against the Sri Lankan Rupee. The change in exchange rate A will likely weaken the position of import competing Australian MNCs. OB. will likely strengthen the position of import competing Australian MNCs. OC. will likely strengthen the position of Sri Lankan MNCS at the expense of Australian MNCs. OD.will likely strengthen the position of Chinese MNCS at the expense of Sri Lankan MNCS and Australian MNCS. E none of the options.

Suppose you observe the following exchange rates: Bid ask 1.2225 1.6389 .7524 $/EUR 1.2167 $/GBP 1.6375 GBP/EUR 0.7495 What is the implied bid and ask exchange rate for $/GBP? 1.6171/1.6311 O 1.6233/1.6248 1.3459/1.3406 0.7430/0.7459

Question 37 Chicago based Corporation X has a number of exporting transactions with companies based in Sweden. Exporting activities result in receivables. If the settlement currency is the Swedish Krona, which of the following will happen by changes in the direct or indirect exchange rates?     Direct Exchange Rate Indirect Exchange Rate   Increases Decreases Increases Decreases A. Loss Gain NA NA B. Loss Gain Gain Loss C. NA NA NA NA D. Gain Loss Loss Gain         Option A     Option B     Option C     Option D

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Question 2 The following wholesale exchange rates are taken from Oanda.com on September 21, 2020. Currency Pair AUD/USD Bid Ask 0.7306 0.7307 AUD/JPY AUD/CAD AUD/NZD AUD/CHF 76.25 76.32 0.9626 0.9634 1.0781 1.0795 0.6648 0.6653 Note: The quotes above are in the base currency/quote currency format. For instance, AUD/USD indicates that AUD is the base currency and USD is the quote currency. The quotes indicate how much of the quote currency is needed for you to get one unit of the base currency. a) Create a table showing the bid and ask quotes of each of the following currency pairs: USD/CAD; JPY/CAD; JPY/NZD; CHF/JPY. b) If you were to buy JPY 100,000 on September 21, how many Australian dollars do you need for the purchase at the above rate? c) If you were to sell NZD 250,000 on September 21, how many Australian dollars will you receive using the rate given above? The forward quotes in point form are as follows for the currency pairs AUD/USD and AUD/CHF as of September 21, 2020. 1-year…

A1a Suppose that you observe the following exchange rates:$1.75/£; $.0075/¥; and £.005/¥.Is there cross-rate equality?

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D Question 6 (Covered Interest Rate Parity) You are facing the following exchange rates and interest rates. Spot rate (¥/$) 180-day forward rate (¥/$) 102 148 180-day U.S. dollar interest rate 8.5% 180-day Japanese yen interest rate 3.2% If you can borrow $1,000,000 or the equivalent amount of yen, and you can profit from the covered interest arbitrage, then your profit is $ (Please keep two decimal places

7.  How can we obtain a pay-domestic-floating, receive-foreign-fixed currency swap by using a pay-domestic-fixed, receive-foreign-fixed currency swap and an appropriate interest rate swap?