In 1997, many East Asian currencies suddenly and dramatically devalued. What is the percentage change in value of a $76 million Investment in Indonesia when the exchange rate changes from $1=2,500 ruplah to $1=10,000 rupiah? Increase percentage In
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- Last year, the exchange rate between the Korean won and the US dollar was KWN 1020 = USB 1. This year, the exchange rate is KWN 1150 =USB 1 . Has the Korean won appreciated or depreciated over the past year? Explain.PleaseSuppose the current exchange rate between the US dollar (USD) and the euro (EUR) is 1 USD = 0.85 EUR. Additionally, assume that the expected rate of return on US assets is 8% and the purchasing price of a US asset is $ 100. Calculate the expected rate of return on this US asset in terms of euros. [5] How does the ability of international investors to quickly and easily switch between domestic and foreign assets impact the relationship between exchange rates and asset prices, particularly in terms of expected rates of return?
- If the U.S. economy experiences growth in the future, the property will be worth $50,000,000 and the exchange course of 1 dollar will be 0.83 euro. If the U.S. economy slows down, the property will be worth $40,000,000, but the U.S. dollar will be stronger and worth 0.89 euro. The probability of the U.S. economy to experience growth is 40% while a slow-down will happen with a 60% probability. Estimate your exposure b to the exchange risk. Compute the variance of the dollar value of your property that is attributable to the exchange rate uncertainty. Discuss which strategies you could suggest to your client to manage economic exposure.A bundle of goods in Japan costs ¥2,642,000 while the same goods and services cost $32,500 in the United States. a. If purchasing power parity holds, what is the current exchange rate of U.S. dollars for yen? b. If, over the next year, inflation is 8 percent in Japan and 10 percent in the United States, what will the goods cost next year? c. Will the dollar depreciate or appreciate relative to the yen over this time period?If the income level in Mexico increases exponentially with stagnant growth in the U.S. income level would most likely lead to (assuming no change in interest rates or other factors) a ____ in Mexican demand for U.S. goods, and the Mexican peso should ____. A. decrease; depreciate B. increase; depreciate C. increase; appreciate D. decrease; appreciate
- Which of the following is true? A large increase in the income level in Singapore along with no growth in the U.S. income level is normally expected to cause (assuming no change in interest rates or other factors) an increase in Singapore demand for U.S. goods, and the Singapore dollar should depreciate. If inflation in Australia suddenly increased while U.S. inflation stayed the same, there would be an outward shift in the demand schedule for AU$ and an inward shift in the supply schedule for AU$. (AU$ stands for the Australian dollar.) For a U.S. speculator, when expecting a foreign currency to depreciate, a possible way to speculate on this movement is to borrow dollars, convert the proceeds to the foreign currency, lend in the foreign country, and use the proceeds from this investment to repay the dollar loan. The main effect of interest rate movements on exchange rates is through their effect on international trade.Case-in-brief - Argentina Currency Devaluation Your company is currently operating in Argentina. Management is concerned to what extent the Argentine peso will be devalued. It wants to examine two scenarios: one where the currency drops 15% and one where it drops 26%. Currently, the exchange rate is 94 pesos (ARS$ 94) to 1 US dollar (US$1). Contribution after marketing in Argentina was 21% of sales (see Exhibit). Your goal is to maintain this percentage. Exhibit: Argentina Contribution after Marketing (ARS$ Argentine Pesos) Unit Sales Manufacturer Sales Costs Gross Margin Total Marketing Cont bution after Marketing Units 46 ARS 325.9 100% 183.3 142.6 73.3 69.3 % 56% 44% 22% 21% QUESTION 1 How would the devaluation of the Argentine peso (ARSS) affect your contribution in the home currency (US$)? Current contribution in USD (home currency): USD $ 0.000 Contribution in USD after 15% drop: USD $ 0.000 Contribution in USD after 26% drop: USD $ 0.000 Millions Million Million Go to last…Case-in-brief - Argentina Currency Devaluation Your company is currently operating in Argentina. Management is concerned to what extent the Argentine peso will be devalued. It wants to examine two scenarios: one where the currency drops 15% and one where it drops 26%. Currently, the exchange rate is 94 pesos (ARSS 94) to 1 US dollar (US$1). Contribution after marketing in Argentina was 21% of sales (see Exhibit). Your goal is to maintain this percentage. Exhibit: Argentina Contribution after Marketing (ARS$ Argentine Pesos) Unit Sales Manufacturer Sales Costs Gross Margin Total Marketing Contribution after Marketing QUESTION 2 Units 46 ARS 325.9 100% % 183.3 56% 142.6 44% 73.3 69.3 22% 21% How much more sales revenue would be needed in Argentina to maintain your current contribution after marketing? Additional Manufacturer Sales in Argentine Pesos after 15% drop: 0.0000 Additional Manufacturer Sales in Argentine Pesos after 26% drop: 0.000 Submit Assignment
- The Japanese yen increases in value relative to the dollar, moving from 120 yento 110 yen to each U.S. dollar. From the perspective of a U.S. firm that produces in the UnitedStates and exports its product to sell in Japan:a. This is bad news.b. It doesn’t matter.c. This is good newsUnder a floating exchange-rate system, an increase in the international demand for electronic appliances manufactured in Japan will result in deflation in the Japanese economy. an increase in Japan's trade deficit with other countries. an appreciation of the yen vis-Ã -vis other currencies. a reduction of international reserves held by the central bank of Japan.Suppose Lufthansa buys 10 Boeing 747s for $150 million in 1991, financed by a five-year loan from the US Export-Import Bank. There is a one-year grace period on principal and interest payments. Which one of the following would NOT be one of the net impacts of this sale in 1991? a . a $150 million reduction in the U.S. trade deficit b . zero change in the U.S. balance of payments in 1991 c . a $150 million reduction in the U.S. capital account surplus d . a $150 million increase in the U.S. trade deficit
