Assume that oil-producing countries have agreed to reduce their production by 30% (not including the U.S.) How would bond prices in the U.S. be affected by this announcement? Explain.
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Assume that oil-producing countries have agreed to reduce their production by 30% (not including the U.S.) How would
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- If a country experiences an increase in interest rates relative to U.S. interest rates, the inflow of U.S. funds to purchase its securities should ____, the outflow of its funds to purchase U.S. securities should ____, and there is ____ pressure on its currency's equilibrium value. * A) increase; decrease; downward. B) decrease; increase; upward. C) increase; decrease; upward. D) decrease; increase; downward.Assume U.S. interest rates are generally above foreign interest rates. What does this suggest about the future strength or weakness of the dollar based on the IFE? Should U.S. investors invest in foreign securities if they believe in the IFE? Should foreign investors invest in U.S. securities if they believe in the IFE?Assume that a country, due to speculation in the foreign exchange market, faces a sudden capital outflow (see figure below). If the country has high levels of foreign denominated debt and inadequate foreign reserves answer the following questions, [Questions 17,18,19] e-Exchange Rate Short Run NX NCO, NY, A shift in the NCD curve dae to a sudden capital outflow NCO before NCO her Long Ran NX NX, NCO Question 17: In a free float foreign exchange rate regime the country will experience immediately. a. an increase in NX due to currency devaluation at NX b. business bankruptcies due to currency devaluation e a devaluation of its currency from e to e d. a devaluation of its currency from esto es with no change in NX e all of the above
- If the U.S. interest rate is higher than the U.K. interest rate, will the U.K. investors place short-term funds in the U.S.? Explain. Assume the investment is covered. If the rate of inflation in the European Union (EU) is above the rate of inflation in the U.S., by 4 percentage points and the dollar depreciates against the euro by 5% during the same time period, what is expected to happen to the real exchange rate? The e exchange rate is defined as the dollar price of euro($/€).Relative inflation rates affect interest rates, exchange rates, the overall economic health of a country, and the operations and profitability of multinational companies. Consider the following statement: Countries with lower inflation rates will have lower interest rates. Based on your understanding of the relationship between relative inflation rates and exchange rates, identify whether the preceding statement is valid or invalid. O The statement is valid, because the nominal interest rate is the sum of the real interest rate plus inflation, so lower inflation rates would result in lower interest rates O The statement is invalid, because the nominal interest rate is independent of the inflation rate. The currency of a country with a higher inflation rate than the U.S. inflation rate will over time against the dollar.Relative inflation rates affect interest rates, exchange rates, the overall economic health of a country, and the operations and profitability of multinational companies. Consider the following statement: If companies borrow from countries with low interest rates, the potential gains from the interest savings will likely be multiplied when the lending country's currency appreciates. Based on your understanding of the relationship between relative inflation rates and exchange rates, identify whether the preceding statement is valid or invalid. The statement is invalid, because as the currency of the lending country appreciates, it becomes more expensive for the borrowing company to repay the initial loan. The statement is valid, because as the currency of the lending country appreciates, it becomes cheaper to repay the initial loan and thus increase savings. If companies borrow from countries with low interest rates, the potential gains from the interest savings will likely be by the…
- What are your views on dedollarization?Which of the following events would most likely result in an appreciation of the U.S. dollar? A. The Fed indicates that it will raise U.S. interest rates. B. U.S. inflation is very high. C. Future U.S. interest rates are expected to decline. D. Japan is expected to increase interest rates in the near future.. Which of the following is incorrect? Country credit risk spread is the difference between yields of international bonds of the country and government bonds of the developed country (generally US. Credit default swap (CDS) is a derivative product which provides the buyer to grantee to be paid back face value of a bond by credit default swap issuer in case the borrower does not pay. In general, a Eurobond of developing country or company interest rate is smaller than sum of same maturity of US bond rate and country of company credit default swap rate point (CDS premium /10000). In general, a company or county Eurobond's primary market sale is done by a syndicated group (banks and other financial intuitions). If the US dollar index (USDX) increases, we expect depreciation of any other currency against the USD.
- Assume that there are substantial capital flows among Country A, Country B and Country C. How will a decrease in interest rates in one country (Say A) exchange rate between country A and country B currencies ( if inflationary expectations remain unchanged). Can this affect the exchange rate between Country A and C too? How13.) What are derivative securities? Why do they exist? 14.) 2020 was year the COVID-19 global pandemic. Specifically explain how both monetary and fiscal policy have been used in the United States as a reaction to date. 15.) What causes the basic changes to overall supply and demand for money and loanable funds?a) Assume the following information: 180‑day U.S. interest rate = 8% 180‑day British interest rate = 9% 180‑day forward rate of British pound = $1.50 Spot rate of British pound = $1.48 Assume that a U.S. exporter will receive 400,000 pounds in 180 days. Would it be better off using a forward hedge or a money market hedge? Substantiate your answer with estimated revenue for each type of hedge. b) As treasurer of a U.S. exporter to Canada, you must decide how to hedge (if at all) future receivables of 250,000 Canadian dollars 90 days from now. Put options are available for a premium of $.03 per unit and an exercise price of $.80 per Canadian dollar (CA$). The forecasted spot rate of the CA$ in 90 days follows: Future Spot Rate Probability (%) $.75 50…