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Why do you think the bid/ask spread is higher for pesos 1. Measuring Effects on Exchange Rates. Tarheel Co. plans to determine how changes in U.S. and Mexican real interest rates will affect the value of the U.S. dollar. (See Appendix C.) a. Describe a regression model that could be used to achieve this purpose. Also explain the expected sign of the regression coefficient. b. If Tarheel Co. thinks that the existence of a quota in ...

Other / Other 13 Apr 2016

Speculative Effects on Exchange Rates 1. Speculative Effects on Exchange Rates . Explain why a public forecast by a respected economist about future interest rates could affect the value of the dollar today. Why do some forecasts by well respected economists have no impact on today’s value of the dollar? 2. Factors Affecting Exchange Rates. What factors affect the future movements in the value of the euro against the dollar? ...

Other / Other 13 Apr 2016

Explain why the value of the British pound against the dollar will not always move 1. Co movements of Exchange Rates. Explain why the value of the British pound against the dollar will not always move in tandem with the value of the euro against the dollar. 2. Factors Affecting Exchange Rates. In the 1990s, Russia was attempting to import more goods but had little to offer other countries in terms of potential exports. In addition, R ...

Other / Other 13 Apr 2016

Inflation Effects on Exchange Rates 1. Percentage Depreciation. Assume the spot rate of the British pound is $1.73. The expected spot rate one year from now is assumed to be $1.66. What percentage depreciation does this reflect? 2. Inflation Effects on Exchange Rates . Assume that the U.S. inflation rate becomes high relative to Canadian inflation. Other things being equal, how should this affect the (a) U.S. demand for Canadian dol ...

Other / Other 13 Apr 2016

Homewood Co. commonly finances some of its U.S. expansion 1. Financing Since the Asian Crisis. Bradenton, Inc., has a foreign subsidiary in Asia that commonly obtained short-term financing from local banks prior to the Asian crisis. Explain why the firm may not be able to easily obtain funds from the local banks since the crisis. 2. Effects of September 11. Homewood Co. commonly finances some of its U.S. expansion by borrowing forei ...

Other / Other 13 Apr 2016

The terrorist attacks on the U.S. on September 11, 2001 were expected to weaken 1. Impact of Crises. Why do you think most crises in countries (such as the Asian crisis) cause the local currency to weaken abruptly? Is it because of trade or capital flows? 2. Impact of September 11. The terrorist attacks on the U.S. on September 11, 2001 were expected to weaken U.S. economic conditions, and reduce U.S. interest rates. How do you thin ...

Other / Other 13 Apr 2016

How can a U.S. firm finance in euros 1. Probability Distribution. a. Discuss the development of a probability distribution of effective financing rates when financing in a foreign currency. How is this distribution developed? b. Once the probability distribution of effective financing rates from financing in a foreign currency is developed, how can this distribution be used in deciding whether to finance in the foreign currency or ...

Other / Other 13 Apr 2016

Trade Restriction Effects on Exchange Rates 1. Trade Restriction Effects on Exchange Rates . Assume that the Japanese government relaxes its controls on imports by Japanese companies. Other things being equal, how should this affect the (a) U.S. demand for Japanese yen, (b) supply of yen for sale, and (c) equilibrium value of the yen? 2. Effects of Real Interest Rates. What is the expected relationship between the relative real intere ...

Other / Other 13 Apr 2016

The percentage change in the spot rates of the Canadian dollar 1. Financing With a Portfolio. Raleigh Corp. needs to borrow funds for one year to finance an expenditure in the United States. The following interest rates are available: Borrowing Rate U.S. 10% Canada 6% Japan 5% The percentage change in the spot rates of the Canadian dollar and Japanese yen over the next year are as follows: Canadian Dollar Japanese Yen Percentage ...

Other / Other 13 Apr 2016

How could Blue Demon Bank attempt to capitalize 1. Speculation. Blue Demon Bank expects that the Mexican peso will depreciate against the dollar from its spot rate of $.15 to $.14 in 10 days. The following interbank lending and borrowing rates exist: Lending Rate Borrowing Rate U.S. dollar 8.0% 8.3% Mexican peso 8.5% 8.7% Assume that Blue Demon Bank has a borrowing capacity of either $10 million or 70 million peos in the inte ...

Other / Other 13 Apr 2016