Until August 1971, industrialized countries around the world maintained a fixed exchange rate of their currencies with the U.S. dollar, which wasinked to gold. The gold standardized system was called the Bretton Woods Fixed Exchange Rate System. This system collapsed in 1971, and sincethen, the dollar has not been linked to goldBased on your understanding of the international monetary system, complete the following statements:exchange rate is the quoted price for a unit of foreign currency to be delivered at a specified date in the future.exchange rate that is allowed to fluctuate only slightly (if at all) around the par value.The government sets aWhen American customers import less from Europe than they export to Europe, the euroThe▼ relative to the dollar.of a currency refers to an increase or decrease of the stated par value of a currency whose value is fixed.Under afloating regime, supply and demand for the currency determine the exchange rate.Currencies under such a regime are calledcurrencies.occurs when a country locks its currency to a specific currency or basket of currencies at a fixed exchange·Arate.

Answer 1:The correct answer is “Forward exchange rate”.Justification: A forward exchange rate is…

Answered: Until August 1971, industrialized…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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"The spot exchange rate for Brazilian Real is Real4.1/$, while the 9 months forward exchange rate is Real4.5/$. This implies that" Owe cannot make any conclusions about the interest rates in US and Brazil based on the given numbers the 9-months risk-free interest rate in US is lower than that in Brazil the 9-months risk-free interest rate in US is the same as that in Brazil the 9-months risk-free interest rate in US is higher than that in Brazil
The following spot FX rates were reported: Japanese Yen British Pound Australian Dollar US Dollar 0.010267 1.616500 0.957900 The exchange rates indicate the number of US dollars necessary to purchase one unit of the foreign currency. From the perspective of a US investor, are the preceding FX rates direct or indirect quotations? How much of each of the foreign currencies is needed to buy one US dollar?
Last year, the Mexican peso/U.S. dollar exchange rate was MXN13.3872/$. Today, the exchange rate is MXN16.5307/$. A U.S. firm has total assets worth MXN14,790,000 located in Mexico that did not change in value over the year. What was the change in the value of the assets in dollars on the company's U.S. balance sheet? Multiple Choice −$193,736.57 $210,087.71 −$210,087.71 $0 $193,736.57
From your understanding, discuss the advantages and disadvantages of a fixed change rate regime. Give examples of two countries that adopt a fixed exchange rate system by mentioning which currency they are pegged to and what rate
Let's say a bank offers the following exchange rates between US Dollar ($), Euro (€), British Pound (£) and Japanese Yen (¥): $/€ 1.20 i.e., €1 equals $1.20 $/£1.40 i.e., £1 equals $1.40 €/£1,16 i.e., £1 equals €1.16 ¥/$120 i.e., $1 equals 120¥ ¥/€140 i.e., €1 equals 140¥ Show how you can make a profit with triangular arbitrage by trading at the above exchange rates by following two alternative strategies. More specifically, the first strategy should only use transactions/conversions between dollar ($), Euro (€) and poundsterling (£), while the second strategy should only use transactions/conversions between dollar ($), Euro (€) and Japanese yen (¥). In both strategies, suppose you start with $1 ($) in your hands. Calculate the profit of each strategy. Which of the two strategies is more advantageous?
The theory of purchasing power parity (PPP) states that in the long-run exchange rates between two countries adjusts so that the price of an identical good is the same when expressed in the same currency. A scanner sells for $65.45 in the United States. The exchange rate between the U.S. dollar and the Swiss franc (SFr) is $0.8245 per Swiss franc. Suppose the price of the scanner in Switzerland was actually SFr 63.50. Assuming no transaction costs, transportation costs, or import restrictions, PPP predicts that the demand would (decrease or Increase) in Switzerland.
Until August 1971, industrialized countries around the world maintained a fixed exchange rate of their currencies with the U.S. dollar, which was linked to gold. The gold standardized system was called the Bretton Woods Fixed Exchange Rate System. This system collapsed in 1971, and since then, the dollar has not been linked to gold. Based on your understanding of the international monetary system, complete the following statements: A exchange rate is the quoted price for a unit of foreign currency to be delivered within a very short period of time. The government sets a exchange rate that is allowed to fluctuate only slightly (if at all) around the pa value. • When American customers import less from Europe than they export to Europe, the euro relative to the dollar. • The of a currency refers to a decrease or increase, respectively, in the foreign exchange value of a floating currency. ● Under a floating regime, the government plays a significant role in managing the exchange rate by…
The European Union has its own currency, the EURO. Years ago, when you crossed borders you had to exchange the currency you had (say, Deutschemarks) for the local currency (say, Swiss Francs). And, if you crossed back, you had to change again. Today, since the early 1990's, many countries in Europe use the common currency, the Euro. And there is one central bank, the European Central Bank, located in Frankfurt, Germany.What benefits might result from the banding together of these countries into one currency? What might be the issues? How might this relate to the creation of the US Federal Reserve system in 1913?
Description A system in which exchange rates are held constant A system in which exchange rates are determined by market forces, rather than government intervention A system in which exchange rates are allowed to fluctuate, but are subject to government intervention A system in which the home currency is synchronized with the value of a particular foreign currency One advantage of a Fixed Exchange Rate Systems Managed Float Freely Floating Pegged exchange rate system is that the country with such a system is less affected by inflation in other countries.
You are given the exchange rate between the U.S. dollar and the Canadian dollar. You are also given the exchange rate between the U.S. dollar and the Mexican peso. What is the name given to the Canadian dollar per Mexican peso exchange rate derived from the information that was provided? A. Swap rate B. Depositary rate C. Forward rate D. London Interbank rate E. Cross-rate
23) If the Canadian dollar to U.S. dollar exchange rate is 1.35 and the British pound to U.S. dollar exchange rate is 0.77, what must the Canadian dollar to British pound exchange rate be?
The U.S. dollar, Norwegian krone, Swiss franc and Japanese yen often are labelled “haven currencies.” During times of international stress, each of these currencies typically can be expected to: (a) depreciate; (b) appreciate; (c) be devalued; (d) yield fewer units of foreign currencies when traded in open markets.

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