(a) Suppose that you live in Korea. Thus, the won is a domestic cur- rency, while the dollar is a foreign currency. Assume that the won interest rate is 5% and the dollar interest rate is 2%. The current exchange rate is W1,000 per dollar. Answer the following questions: a. The won is expected to depreciate against the dollar. Therefore, the expected exchange rate will be W1,030 per dollar a year later. If you are a holder of dollar deposits, what should you do?

(a) Suppose that you live in Korea. Thus, the won is a domestic cur- rency, while the dollar is a foreign currency. Assume that the won interest rate is 5% and the dollar interest rate is 2%. The current exchange rate is W1,000 per dollar. Answer the following questions: a. The won is expected to depreciate against the dollar. Therefore, the expected exchange rate will be W1,030 per dollar a year later. If you are a holder of dollar deposits, what should you do?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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