You are required to identify the expected change in the forward premium on Japanese yen which is 6% and the interest rate parity exists between the US dollar and the Japanese yen. If the interest rate in USA is expected to decrease. Decrease Remain same None of the above Increase

You are required to identify the expected change in the forward premium on Japanese yen which is 6% and the interest rate parity exists between the US dollar and the Japanese yen. If the interest rate in USA is expected to decrease. Decrease Remain same None of the above Increase

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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Use the information below to answer the questions that follow. Japanese yen Japanese yen 6 month Australian dollar Australian dollar 3 month U.S. $ EQUIVALENT .00916 .00899 .7748 .7751 a. Yen b. Australian dollar c. Dollar relative to yen d. Dollar relative to A$ CURRENCY PER U.S. $ 109.20 111.21 1.2907 1.2902 a. Is the yen selling at a premium or a discount? b. Is the Australian dollar selling at a premium or a discount? c. Do you expect the value of the dollar to increase or decrease relative to the value of the yen? d. Do you expect the value of the dollar to increase or decrease relative to the value of the Australian dollar?
Suppose the annual rate of inflation in Taiwan is 6.66%, and the annual rate of inflation in Mexico is 5.99%. If the Mexican peso depreciates relative to the Taiwan dollar by 4% in real terms, then which of the following would be correct? a, Nominal exchange rate appreciation by 4.825%. b. Nominal exchange rate depreciation by 3.393%. c. Nominal exchange rate appreciation by 3.512%. d. Nominal exchange rate depreciation by 4.603%. e. There is no change in the nominal exchange rate.
Q1-10 If a PPP estimate of the dollar/pound exchange rate is $1.61/£ and the current spot rate is observed to be $1.68/£, on the basis of these two rates you should, viewing the long-run, a. expect the dollar to appreciate against the pound. b. take a "short" position in dollars. c. expect the pound to appreciate against the dollar. d. have no expectation regarding the likely movement of the dollar/pound exchange rate.
Am. 117.
1) The difference between direct and indirect quotes: What is a direct pound for euro quote? What is a direct dollar quote for pound? What is an indirect dollar quote for yen? What is the indirect Swiss franc for pound quote? 2) Nominal annualized realized appreciation: Two months ago the price of a dollar in Tokyo was 95.6789. Today it is 93.5432. What is annualized realized yen appreciation? Four months ago direct dollar quote for pound was 1.2468. Today it is 1.1357. What is annualized realized pound appreciation? 3) Appreciation vs depreciation: How much did the dollar appreciate if the euro depreciated 3.5778% against the dollar? 4) Buying and selling For-Ex with bid-as quotes: How many dollars do you need to buy 3 million euros if the indirect dollar quote for euro is 0.8972-13? How many Swiss francs will you get from one billion yen if the price of Swiss franc in Tokyo is 101.3050-15? How many dollars will you get from 6 million pounds if the direct dollar quote for…
fINANCE
Suppose that the one-year U.S. interest rate is 8% and the equivalent one-year India interest rate is 12%. According to approximate covered interest parity, there is: Forward discount on dollar. Forward premium on dollar. Forward premium for Indian rupee. Forward flat on dollar.
Suppose the spot and three-month forward rates for the yen are ¥114.37 and ¥113.89, respectively. a. Is the yen expected to get stronger or weaker? b. What would you estimate is the difference between the inflation rates of the United States and Japan? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. Yen expected to get strong or weaker b. Difference between the inflation rates %
Assume that interest rate parity holds. The Mexican interest rate is 50 percent, and the U.S. interest rate is 8 percent. Subsequently, the U.S. interest rate decreases to 7 percent. According to interest rate parity, the peso's forward ____ will ____. a. premium; increase b. discount; decrease c. discount; increase d. premium; decrease can you give the steps and why

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