You are given that the borrowing rate in the US is 10%. You expect the rupee to depreciate by 5% per year. What is the maximum rate you should be willing to pay in India to be indifferent from borrowing from either market for one year?
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- Between 1975 and 1995, U.S. infation averaged 5.7% per year, whileinfation in Japan averaged 3.6% per year. At what rate should we expectthe dollar to depreciate against the yen between 1975 and 1995?A South American country has had a high rate of inflation. Recently, its exchange rate was 15 cruzados per dollar; that is, one dollar will buy 15 cruzados. It is likely that the country will continue to experience a 25% inflation rate and that the U.S. will continue at a 3% inflation rate. Assume that the exchange rate will vary the same as the inflation. In this situation, one dollar will buy how many cruzados 5 years from now?What would be the effect of a devaluation on a country’s imports and exports? If a country imports most ofthe goods included in the basket of goods and servicesused to calculate the CPI, what do you think the effectwill be on this country’s inflation rate?
- If 1 US ($) is worth 1.5 (E) British Pound sterling, then that suggests that the US $ is Weaker O Stronger Appreciating StrengtheningWhat are the Relationship between Foreign Resource and importThe USD vs. GBP exchange rate is $1.50 vs. £1. A UK MNC operating in the US plans to sell goods worth $100 mil- lion at today’s prices to US customers. Show that its GBP revenue in r eal terms will not be affected if PPP applies under each of the following conditions: (i) UK and US inflation at 5% p.a. (ii) UK inflation 5%, US inflation 2%. (iii) UK inflation 2%, US inflation 5%.
- If the Indian government unexpectedly announces thatit will be imposing higher tariffs on foreign goods oneyear from now, what will happen to the value of theIndian rupee today?Suppose Australia has an annual 6% inflation rate, while the annual growth rate of the nominalexchange rate, expressed in euros per Australian dollar, is 4%. If purchasing power parity holds,what is the annual inflation rate in the Eurozone?What is the Foreign Exchange Markets of LG Electronics?
- For each of the following events/items, state whether the impact is positive(+), negative (-) or no impact (0).a) A Malaysian company has imported from Japan. The Yen appreciates against theRinggit.b) A Malaysian company has imported from Japan. What is the impact if the Ringgitappreciates against the Yen?c) A Malaysian company borrows in Euros from Deutsche Bank. The loan is repayablein six months. The Ringgit appreciates against the Euro.d) What happens if the loan in (c) above is repayable in one lump sum in five yearsfrom now and the Euro now appreciates against the Malaysian Ringgit?e) A Malaysian mutual fund invests in an Australian ETF (exchange traded fund). TheAustralian Dollar appreciates against the Malaysian Ringgit.During 2014 till 2016, Malaysian exchange rate faced a depreciation. Based on this situation, what is the reason of the depreciation happen in that year?Consider the following Purchasing Power Parity (PPP) conversion rate for selected countries in 2021. The table shows the equivalent purchasing power of per USD in each country. Table 1. PPP conversion rate, 2021 (local currency unit per USD) 2021 Country (currency) Indonesia (IDR) Japan (JPY) 4,738.64 61.47 Taiwan, ROC (TWD) 13.48 Source: OECD, 2022 If a 'Subway' tuna mayo sandwich in Indonesia costs IDR 37,500.00, how much does it cost in Taiwan? (Hint: the PPP conversion rate is the real exchange rate to USD) a. TWD342.39. b. TWD109.53. C. TWD2,709.54. d. TWD7.91.