1. Suppose that the exchange rate of the US dollar against the British Pound has changes from $1/£ to $0.98/£. Did the US dollar appreciate or depreciate? Why? 2. Suppose that the exchange rate of the US dollar against the euro has changes from $1/€ to $2.9/€. Did the US dollar appreciate or depreciate? Why? 3. Suppose that the interest rate on a US dollar deposit is 3% and the interest rate on a Japanese yen deposit is 2.1%. Today's exchange rate is $1/¥ and the expected rate one year in the future is $1.2/4, so $100 today can be exchanges for ¥100. Which currency deposit yield a higher expected rate of return (which currency investors should be willing to hold)? Why?

1. Suppose that the exchange rate of the US dollar against the British Pound has changes from $1/£ to $0.98/£. Did the US dollar appreciate or depreciate? Why? 2. Suppose that the exchange rate of the US dollar against the euro has changes from $1/€ to $2.9/€. Did the US dollar appreciate or depreciate? Why? 3. Suppose that the interest rate on a US dollar deposit is 3% and the interest rate on a Japanese yen deposit is 2.1%. Today's exchange rate is $1/¥ and the expected rate one year in the future is $1.2/4, so $100 today can be exchanges for ¥100. Which currency deposit yield a higher expected rate of return (which currency investors should be willing to hold)? Why?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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