Question Details

8.Exchange Rate Movements[LO3] Are the following statements true or false?

a.       If the general price index in Great Britian rises faster than that in the United States, we would expect thecpoud to appreciate relative to the dollar.

b.      Suppose you are a German machine tool exporter, and you invoice all of your sales in foreign currency. Futher suppose that the euroland monetary authorites begin to undertake an expansinary monetary policy. If it is certain that the easy money policy will result in higher inflation rates in euroland relative to those in other countries, you should use foward markets to protect yourself against future losses resulting from the deterioration in the value of the euro.

c.       If you could accurately estimate differences in the relative inflation rates of two countries over a long period while other market participants were unable todo so, you could successfully speculate in spot currency markets.

9. Exchange Rate Movements[LO3] Some countries ecourage movements in their exchange rate relative to those of some other country as a short-term means of addressing foreign trde imbalances. For each of the following scenarios,evaluate the impact the announcement would have on an Americn exporter doing business with the forign country:

a.       Officials in the adminstration of the U.S government announce that they are comfortable with a risin euro relative to the dollar.

b.      Bristish monetary authorities announce that they feel the pound has been driven too low by currency speculators relative to the dollar.

c.       The Brazilian government announces that it will print billions of new reais and inject them into the economy in an effort to reduce the country’s unemployment rate.

10. International Capital Market Relationships [LO2] We discussed five international capital market relationships: relative PPP, IRP, UFR, UIP, and the international Fischer effect. Which of these would you expect to hold most closely?

1.       Using Exchange Rates [LO1] Take a look back at Figure 21.1 to answer the following questions:

a.       If you have $100, how many euros can you get?

b.       How much is one euro worth?

c.        If you have 5 million euros, how many dollars do you have?

d.       Which is worth more, a New Zealand dollar or a Singapore dollar?

e.        Which is more more, a Mexican peso or a Chilean peso?

f.        How many Mexican pesos can you get for a euro? What do you call this rate?

g.        Per unit, what is the most valuable currency of those listed? The least valuable?

    ;���܁�8�-�����$��h���yQR���8/+2��t˩���$�
��5����B��om]R���G��v�=��w~1����,��{�[�7ͺ�?�� Ƀ��A�KG�^��ҩi�|G�F����s�cA�;�����֤4yy�9�|�׿+���[=��/*��D��"e)�V��-yfoh�E���V�