E) If the Malaysian price level rises by 6% relative to the price level in the United States, what does the theory of Purchasing Power Parity predict will happen to the value of the Malaysian ringgit in term of Dollars?
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- 1Q1. Suppose a Bangladeshi exporter is expecting to receive $15 million sometime in the next three months from an American importer. To hedge this, the Bangladeshi exporter buys an option on the USS. The premium is 0.55 BDT/USS, for options with Exercise price = 0.551 a) What option should he buy? b) What is the cost incurred today by the Bangladeshi exporter? c) ) What is the price floor that the exporter has set on the price of US$ 84.5 BDT/USS.? d) What is the actual amount that the exporter will receive if the spot rate at the end of three months is 85.5 BDT/USS? e) What is the actual amount that the BD exporter will receive if the spot rate at the end of three months is 84.5 BDT/USS? Q2. Suppose a Bangladeshi importer is expecting to pay $15 million sometime in the next three months to an American exporter. To hedge this, the Bangladeshi importer buys an option on the US$. The premium is 0.75 BDT/US$, for options with Exercise price = 86.5 BDT/US$. a) What option should he buy? b)…If the U.S. dollar has fallen in comparison with foreign currencies, which of the following statements is TRUE? U.S. products cost more for foreign consumers. U.S. exports are likely to fall. Foreign currencies buy fewer U.S. dollars. U.S exports increase.
- Suppose then that we have three London seats, New York and Madrid In the first, the buyer type is 109,590 Yen per Dollar, in London the selling rate is 180,000 Yen per Pound Sterling while in New York is 1,677 dollars per British Pound Suppose we have 100,000,000 yen Carry out the arbitrage indicate the gain in terms absolute and percentage termsPlease answer part c questions. Part a and b has been answered.Which of the following is true? A large increase in the income level in Singapore along with no growth in the U.S. income level is normally expected to cause (assuming no change in interest rates or other factors) an increase in Singapore demand for U.S. goods, and the Singapore dollar should depreciate. If inflation in Australia suddenly increased while U.S. inflation stayed the same, there would be an outward shift in the demand schedule for AU$ and an inward shift in the supply schedule for AU$. (AU$ stands for the Australian dollar.) For a U.S. speculator, when expecting a foreign currency to depreciate, a possible way to speculate on this movement is to borrow dollars, convert the proceeds to the foreign currency, lend in the foreign country, and use the proceeds from this investment to repay the dollar loan. The main effect of interest rate movements on exchange rates is through their effect on international trade.
- The Japanese yen increases in value relative to the dollar, moving from 120 yento 110 yen to each U.S. dollar. From the perspective of a U.S. firm that produces in the UnitedStates and exports its product to sell in Japan:a. This is bad news.b. It doesn’t matter.c. This is good newsIf the income level in Mexico increases exponentially with stagnant growth in the U.S. income level would most likely lead to (assuming no change in interest rates or other factors) a ____ in Mexican demand for U.S. goods, and the Mexican peso should ____. A. decrease; depreciate B. increase; depreciate C. increase; appreciate D. decrease; appreciateCalculate the contribution to total performance from currency, country, and stock selection for the manager in the example below. All exchange rates are expressed as units of foreign currency that can be purchased with 1 U.S. dollar. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Input all amounts as positive values. Return on EAFE Weight Equity Index E1E0 Manager's Weight Manager's Return Europe Australasia Far East 0.2 19% 0.80 0.11 16% 0.6 15 1.10 0.40 19 0.2 24 1.00 0.49 19 Currency Selection Country Selection Stock Selection % % % Profit or Loss relative to EAFE relative to EAFE relative to EAFE
- A company manufactures a product in the United States and sells it in England. The unit cost of manufacturing is $52. The current exchange rate (dollars per pound) is 1.213. The demand function, which indicates how many units the company can sell in England as a function of price (in pounds) is of the power type, with constant 27556733 and exponent -2.5. A) Develop a model for the company's profit (in dollars) as a function of the price it charges (in pounds). Then use a data table to find the profit-maximizing price to the nearest pound. Assume that the price ranges from £45 to £100 in increments of £1. Round your answer for the maximum profit to the nearest dollar and your answer for the best price to the nearest pound. 1. Maximum profit: $______ 2. Best price: £ ______Question (Short answers) S Suppose that prices in Brazil are rising faster than US prices, and the US is a very important trading partner of Brazil. (Brazil’s currency is called the real.) Suppose the dollar/real rate is floating. What does relative purchasing power parity (RPPP) say what should happen to the value of the real relative to the US dollar? Explain.4. Suppose, the INR65.4015/USD in the FX Market. The selling price of the basic SONY LED TV is USD 75 in US, while in India the same TV is sold for 5,300 INR. What should be the forward rate USD/INR to valid the PPP? If the PPP is not valid what are the necessary steps to get the equilibrium in US and Indian markets?
