Suppose for Home: Ms=2488, Md/P=5723-62770*R, P=3 Suppose for Foreign:Ms=1736, Md/P=7147-65320*R, P=2 Suppose Absolute PPP holds. What is the expected exchange rate Ee? Answer: x (1.473)
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- Assume Switzerland has a one-year interest rate of 3% and that of Ghana is 16%. If the International Fisher Effect (IFE)holds, what would you forecast for the Swiss franc exchange rate with respect with the cedi be for a one-year period? Assume that the initial exchange rate is 5000cedis to a Swiss franc.Suppose the current spot exchange rate for the Chinese yuan is USD 0.15 per CNY. If the domestic prices of traded goods rise 70% over the next 10 years in China and 20% over the same period in the United States, then, according to the relative purchasing power parity hypothesis, the spot exchange rate for the yuan in 10 years will be approximately:If the foreign price level increases by 4%, and the domestic price level increases by 17%, by what percent should the exchange rate of domestic currency per foreign currency increase, given relative PPP holds? Your answer should be an integer with a % sign assumed to follow (e.g., if you wish to say 48 percent, write 48). The percent increase in the exchange rate should be
- Suppose that the current interest rate in the US is 0.89%. If the NIRP predicts that the exchange rate between Madagascar's Ariary and the US dollar will jump from 3,750 Ariary/Dollar to 4,244 Ariary/Dollar, what is the current interest rate in Madagascar? Round your answer to two decimal points and omit any units (e.g., 1.23 NOT 1.23%).If the direct quote for the exchange rate between the US Dollar ($) and Japanese Yen (Y) is written as $20/Y, then what will be the indirect quote written as: a) 0.05Y/$ b) 0.5Y/$ c) 0.12Y/$ d) 120Y/$2) Exchange rates and interest rates are connected through the parity conditions. Let the New Zealand interest rate be 5% per annum, the US interest rate be 10% per annum, the spot exchange rate be 0.8USD/1 NZD, and the one year forward exchange rate to be 0.85USD/1 NZD. a) What is the return, in NZD, a New Zealand financial trader would get if they invested 1 NZD in New Zealand? b) What is the return, in NZD, an New Zealand financial trader would get if they invested 1 NZD in the US? [Hint: you'll have to exchange that NZD for USDI] c) As you should find, the values given mean the parity condition does not hold. Given the interest rates are fixed, what will happen to the value of the spot exchange rate now? Think about this in terms of demand and supply for the NZD in the FOREX market, and you may draw out a diagram if you wish. d) Now repeat c) for the change in value of the forward exchange rate.
- Suppose the current spot exchange rate for the Chinese yuan is USD 0.15 per CNY. If the domestic prices of traded goods rise 70% over the next 10 years in China and 30% over the same period in the United States, then, according to the relative purchasing power parity hypothesis, the spot exchange rate for the yuan in 10 years will be approximately: USD 0.35 per CNY USD 0.60 per CNY USD 0.11 per CNYIf core price inflation has grown at a compound growth rate of 2 percent per annum in the United States and 0.06 percent in Japan for the past eight years, what exchange rate represents PPP today if the two currencies eight years ago in 2005 were in parity and exchanged at the rate of ¥109/$?Sri Lanka Rupee (SLRs) fluctuates in recent times due to its economic situation. The Sri Lanka Rs trading in December 2020 at SLRs 181.5/$. The Sri Lanka Rs. is expected to appreciate by 7% in 2021. a) What will be the exchange rate after appreciation of the Sri Lankan currency? b) What will be the percentage change of Sri Lanka currency if, on March 31, 2021, it is trading at SL Rs 179.9/$?
- Assume Australia to be home and Vietnam to be the foreign economy. If the real exchange rate q between Australia and Vietnam is 0.7 and the inflation rate differential (home inflation – foreign inflation) is -1%, given a 15% speed of convergence, what would be the expected rate of change in the nominal exchange rate (dollar per dong)?Suppose $2, 400 CAD could be used to purchase $2, 086.96 USD last year. Part (a): What was the nominal exchange rate last year? Be sure to quote your answer in the proper format (example: CAD = 1 USD). Roud your answer to the nearest cent (two decimal places: 0.50). Part (b): This year, if the exchange rate is $1.02 CA) = $1 USD, has the USD experienced a nominal appreciation or a nominal depreciation? Part (c): How will this change to the nominal exchange rate impact Canada's NX levels? Use a few sentences to explain how you arrived at this conclusion.If the exchange rate between the US Dollar ($) and the Indian Rupee (Rs.) goes from being Rs. 60/$ to Rs. 65/$, we say that the Indian Rupee has __________ relative to the US Dollar. a) appreciated b) arbitraged c) stagnated d) depreciated