Assume that JA$ 1.00 = GUY $ 2.00. In each scenariobelow you are asked to find the new value of theJamaican Dollar (JMD). You will always start a newcalculation using the original exchange rate givenabove. Further, you are required to arrive at a possibleexplanation for each change and illustrate same on adiagram of the market for Jamaican Dollars. (a) TheJMD depreciates by 1%. (b) The JMD depreciates by3% (c) The JMD appreciates by 2%. (d) The JMDappreciates by 4%.

The objective of the question is to calculate the new value of the Jamaican Dollar (JMD) in each of…

Answered: Assume that JA$ 1.00 = GUY $ 2.00. In…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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please answer in text form and in proper format answer with must explanation , calculation for each part and steps clearly
Question 4 State the impact of each of the following changes (other variables remaining unchanged) on the real exchange rate. (a) The Consumer Price Index (which measures the price level) in the United States rises by 4 percent. (b) The Consumer Price Index in Jamaica rises by 9 percent. (c) The two Consumer Price Index changes above occur at the same time.
a) Using the following information, determine each one of the theoretical Exchange Rates (E.R.) according to International Fisher Effect. b) Show how Money Market Arbitrage could be done assuming that the loan is 1,000 units of the currency of the country where the loan is contracted. Determine the profit in the currency in which the loan was contracted. ΜARKET ΜARKET E.R. E.R. COUNTRY CURRENCY INTEREST Dec-01 Dec-02 Dec-02 Mexico MXP 12 % 19.56 20.15 Turkey TRY (Lira) 6 % 5.9419 6.07673 Australia AUD 4 % 1.7759 1.81183 Jаpan JPY 8 % 105.866 113.978 United GBP 5 % 0.5991 0.617849 Kingdom (UK) South Korea KRW (Won) 9% 1,658.62 1,793.37 Canada CAD 5 % 1.3736 1.4942 U.S.A.. USD 3%
China and India are trading partners, and there are international savings flows between the two countries. China’s currency is the yuan and India’s currency is the rupee. If interest rates in China begin to rise relative to those in India, which of the following changes can we expect to see in the Indian foreign exchange market? Selected Answer: Demand for the Chinese yuan would fall. Answers: Demand for the Chinese yuan would fall. Demand for the Indian rupee would rise. Supply of the Indian rupee would fall. Supply of the Chinese yuan would fall.
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17. Consider two exchange rates X/Y and Z/Y. (For example EUR/USD and JPY/USD.) They both follow perfectly correlated geometric Brownian motions with parameters (1,01) and (μ2,02). (a) The cross-exchange rate X/Z (for example EUR/JPY) follows a standard Brownian motion (b) The cross-exchange rate X/Z (for example EUR/JPY) follows a general Brownian motion (c) The cross-exchange rate X/Z (for example EUR/JPY) follows a geometric Brownian motion (d) The cross-exchange rate X/Z (for example EUR/JPY) does not follow a geometric Brownian motion
esources Assume the following: (1) the interest rate on six-month treasury bills is 8 percent per annum in the United Kingdom and 4 percent per annum in the United States; (2) today's spot price of the pound is $1.50, while the six-month forward price of the pound is $1.485. If the price of the six-month forward pound were to then U.S. investors would no longer earn an extra return by shifting funds to the United Kingdom. O rise to $1.52 O rise to $1.55 O fall to $1.40 O fall to $1.47

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